TRANSCRIPT OF PROCEEDINGS

Transcription

1 STATE OF CALIFORNIA --ooo-- CALIFORNIA STATE LOTTERY COMMISSION COMMISSION MEETING TIME: :00 a.m. DATE: Thursday, November, 0 PLACE: California State Lottery Headquarters 00 North Tenth Street Sacramento, California --ooo-- TRANSCRIPT OF PROCEEDINGS --ooo-- Transcribed By: Cathy S. Dizon Daniel P. Feldhaus, C.S.R., Inc. Certified Shorthand Reporters Yermo Way, Sacramento, California Telephone.. Fax..0 FeldhausDepo@aol.com

2 A P P E A R A N C E S California State Lottery Commission GREGORY AHERN Chair of the Commission Commissioner CONNIE M. PEREZ-ANDREESEN Vice Chair of the Commission Commissioner NATHANIEL KIRTMAN III Commissioner ROWENA LIBANG-BOBILA Commissioner --o0o-- Participating Lottery Commission Staff HUGO LÓPEZ Director NICOLE SOLURI Chief Deputy Director and Acting Chief Counsel SHARON ALLEN Deputy Director Sales and Marketing Division NICHOLAS BUCHEN Deputy Director Finance Division PAULA NEGRETE Deputy Director External Affairs Division CHRISTOPHER RIESEN Deputy Director Information Technology Services Division

3 A P P E A R A N C E S Participating Lottery Commission Staff ELISA S. TOPETE Assistant to the Commission GLENDA LEWIS Recording Secretary --o0o--

4 I N D E X Description Page. Call to Order --. Pledge of Allegiance --. Roll Call of Commissioners --. Consider Approval of the Agenda --. Approval of the Minutes of the June, 0, Commission Meeting --. Director s Report a. Director s Comments b. Give Responsibly Campaign. Consent Calendar (None). Action Items a. Approval of Regulation Changes to Multistate Game Prize Claims b. United Parcel Services (UPS) Contract Amendment c. Network Firewall Refresh Procurement d. Amendment to Outside Counsel Contract for Real Estate Legal Services 0. Commissioner General Discussion. Scheduling Next Meetings: January, March, May, and June, 0, in Sacramento

5 I N D E X Description Page. Public Discussion. Adjournment --ooo--

6 0 Thursday, November, 0 Sacramento, California --o0o-- (Start of recording) DIRECTOR LOPEZ: -- so as you can see, total sales for the first weeks of this fiscal year are slightly higher than $. billion. This is a percent increase over the same period a year ago. This puts total year-to-date sales percent ahead of our current sales goal. As reflected, all of our products are currently ahead of their respective sales goals or very close to their target. Our current trajectory puts us on pace to comfortably achieve our $. billion sales goal for this fiscal year. Before I update you on our Scratchers product line, I m going to discuss our jackpot games. Now, we were fortunate to have large jackpots to start off this fiscal year, which helped propel sales for both Powerball and MEGA Millions ahead of last year s figures and above their current sales goal. As you are aware, on Saturday, October th, we implemented the game changes for MEGA Millions that were approved in the June Commission meeting. As a reminder, changes included increasing the price per

7 0 ticket from $ to $, raising the starting jackpots from $ million to $0 million, and modifying the matrix of the game or changing the odds. Initial observations: Well, it s just been over a week of sales; and our jackpots are actually kind of at the lower levels. So it s a little too early to report any impact on these game changes. Having said that, we have observed that sales were percent higher when compared to the last MEGA Millions jackpot that was at a similar amount. SuperLotto Plus is ahead of its goal but slightly behind last year s sales goal; but that was when the jackpot was higher. Hot Spot sales continue to run about percent higher than a year ago, thanks to a concerted effort to increase the number of social retailers and making winning numbers available on our mobile app. Daily Games are above last year s figures and ahead of this year s year-to-date goals. As reflected, Scratchers sales for this fiscal year have been consistently strong. The chart shows Scratchers sales are percent above their sales goal; and their sales are percent higher than at this time a year ago. As you know, based on numerous factors -- price

8 0 point, type of game, season of the year, and the timing of the game launch -- we develop weekly sales goals for Scratchers. Some of these weekly sales goals make the fiscal year-end sales goal for Scratchers, which is $. billion this year. This chart provides you a quick snapshot regarding how the Lottery is matching up with its weekly Scratchers sales goal. As you can see, in of the first weeks of this fiscal year, Scratchers sales have exceeded their weekly sales goals. At the last Commission meeting, I highlighted some games that were introduced during the summer. Now, I want to show you some of the games previously launched which will be introduced soon, before the end of the fiscal year. I ve provided some, and they should be there at the dais there for you. So here, we have very colorful the Dia de los Muertos Scratchers ticket. This ticket reflects the original artwork of a local Sacramento artist. Again, this ticket celebrates life of loved ones that have passed. For this game, we had a limited advertising campaign, but we successfully used social and digital advertising marketed statewide, as well as outdoor advertising and radio in selected media markets. It s been a popular ticket; and we received a record-breaking

9 0 response in response to its social and media campaign. October rd, we introduced the $ Holiday Magic ticket, along with some other non-seasonal games. This is another large ticket. It measures inches by inches, and offers seven different games, with 0 chances to win. Due to its sheer size, we can t use multiple points of entry. It requires a special dispenser and cannot be sold in our instant-ticket vending machines or in our in-counter dispensers. Despite this barrier, the ticket was available for sale at nearly percent of our retailers during its first week of sales. This, thanks to the stellar efforts of our sales force and an airtight sales plan. On November th, we will be launching two new games themed around winter holidays: The $ game, Merry Money, which can be used as holiday gift tags; and the $ Cold Hard Cash, which offers a fun play style to go with this winter-themed game. Over the holiday season, we will employ a full advertising campaign to support the message that Scratchers make great gifts. And we ll include a full complement of media elements like TV, radio, outdoor, digital, and social media, all starting on Thanksgiving. So that concludes my remarks.

10 0 I can answer any questions that you may have, or I have staff here to assist me. CHAIR AHERN: Any comments or remarks? (No response) CHAIR AHERN: Questions? (No response) CHAIR AHERN: All right, thank you, Hugo. DIRECTOR LOPEZ: Thank you. CHAIR AHERN: And I think we go to.b. And, Paula, good morning. MS. NEGRETE: Good morning, Commissioner Ahern and Commissioners. As Director Lopez mentioned, I m here to provide a brief presentation on the Gift Responsibly campaign. With the holiday season upon us, the Lottery wants to remind its loyal players and retail partners to gift responsibly. This means not selling or gifting Lottery products to minors. The Lottery is one of U.S. and international lotteries that joins the National Council on Problem Gambling and McGill University for its annual holiday campaign. We call it Gifting Responsibly. The Gift Responsibly Campaign begins the day after Thanksgiving through the end of the year, where we strongly discourage

11 0 the gifting and selling of Scratchers to minors during the holidays. The Lottery s efforts to promote the campaign include the coordination of special messaging on the Lottery s electronic point-of-sale and Hot Spot monitors; draw-ticket messaging; a write-up in the retail -- in the retail product-plan booklet that goes out to every Lottery retail location; a write-up in our Player s Lounge e-newsletter; weekly, non-promoted posts on the Lottery s social media platforms; and to paid promoted posts on Facebook and Instagram. Internally, we also highlight the campaign on the Lottery s intranet page, Click ; the director s weekly reports through sales staff meetings; and campaign displays at all district offices. While staff is finalizing the new assets for this year s campaign, we d like to share last year s video that appeared on Facebook. There is sound. [Video presentation.] MS. NEGRETE: The video generated $. million impressions, meeting our social media goals that we laid out in our World Lottery Association certification goals. We hope to continuously improve this coming year. And I d be happy to answer any questions you

12 0 may have about the campaign. CHAIR AHERN: Any questions or comments? (No response) MS. NEGRETE: Thank you. CHAIR AHERN: Thank you very much, Paula. Moving on to the Item Number for Consent Calendar. There are no items under the Consent Calendar, so we ll proceed to the action items, starting with.a, Approval of Regulation Changes to the Multistate Game Prize Claims. Nick? MR. BUCHEN: Good morning, Commissioners. CHAIR AHERN: Good morning. COMMISSIONER LIBANG-BOBILA: Good morning. MR. BUCHEN: So I m requesting your approval of regulation changes that will prohibit ticketless claims for all Powerball and MEGA Millions prizes. As you are aware, the Lottery has discretion to pay a prize without submission of an original winning ticket if the claimant submits a signed claim form and provides sufficient evidence to enable the Lottery to validate the claim. This is referred to as a ticketless claim, and the Lottery may only pay the ticketless claimed prize after the period to claim the prize has expired.

13 0 So both the MultiState Lottery Association and the MEGA Millions consortium recently revised the games rules for Powerball and MEGA Millions, respectively, to prohibit lotteries from paying any Powerball or MEGA Millions prize unless the original valid winning ticket is submitted with the prize claim form. So the amended regulations before you conform to these game rule changes and make some additional associated technical cleanup. So with that, I ask for your adoption of the revised regulations. CHAIR AHERN: All right, do any of the commissioners have any questions or comments regarding Action Item.a? COMMISSIONER LIBANG-BOBILA: No. CHAIR AHERN: All right, does any member of the public want to address the Commission regarding.a? (No response) CHAIR AHERN: Do I hear a motion to approve Action Item.a, Approval of Regulation Changes to Multistate Game Prize Claims? COMMISSIONER KIRTMAN: [Inaudible.] VICE CHAIR PEREZ-ANDREESEN: Second. MS. TOPETE: Commissioner Kirtman. CHAIR AHERN: Yes.

14 0 MS. TOPETE: Commissioner Libang-Bobila. COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Commissioner Perez-Andreesen. VICE CHAIR PEREZ-ANDREESEN: Yes. MS. TOPETE: Chairman Ahern. CHAIR AHERN: Yes. All righty. Thank you. MS. NEGRETE: Thank you. CHAIR AHERN: We ll move on to Action Item.b, United Parcel Contract Amendment. Sharon? MS. ALLEN: Good morning, Commissioners. CHAIR AHERN: Good morning. COMMISSIONER LIBANG-BOBILA: Good morning. MS. ALLEN: I m here to request approval for the UPS Contract Amendment. The Lottery contracts with UPS for Scratchers shipping and return services. The current contract term is set to expire on February th, 0. Staff recommends that the Commission approve an amendment to this contract to extend the term by one year, and increase the total expenditure authority by $. million. In 0, the Lottery Commission awarded UPS a five-year contract for shipping Scratchers tickets to

15 0 our retailers, with the option to extend for two one-year additional terms. The five-year term of the contract was from February 0 th, 0, to February th, 0; and the total initial contract amount was $0 million. In 0, the Commission approved a first contract amendment to add $. million in additional funds to account for a new ticket-return process, bringing the maximum expenditure amount to $. million. In 0, the Lottery exercised the first one-year extension option, and increased the contract amount by $. million. This extended the term of the contract to February th, 0, and the total contract amount to $.0 million. UPS has provided excellent shipping services throughout the contract term; and continuing the use of UPS is consistent with efficient operation and the goals of the Lottery. In order to continue these services, the Lottery will need to exercise the second one-year extension option that is available under the current contract. Additionally, it will be necessary to increase the contract expenditure authority by $. million to

16 0 fund the anticipated shipping costs during the extension period. With the approval of the one-year extension option and the $. million spending authority increase, the new contract expiration date will be February th, 0; and the total amount obligated under the contract will be $. million. We request the Commission approve an amendment to the UPS Scratchers shipping services contract to extend the contract term by one year, and increase the total contract expenditure authority by $. million. I would be happy to answer any questions you might have. CHAIR AHERN: All right, do any commissioners have any questions? COMMISSIONER LIBANG-BOBILA: No questions. CHAIR AHERN: All right. Does any member of the public wish to address the Commission regarding Action Item.b? (No response) CHAIR AHERN: Do I hear a motion to approve Action Item.b, United Parcel Services Contract Amendment? COMMISSIONER KIRTMAN: [Inaudible.] VICE CHAIR PEREZ-ANDREESEN: Second.

17 0 MS. TOPETE: Commissioner Kirtman. COMMISSIONER KIRTMAN: Yes. MS. TOPETE: Commissioner Libang-Bobila. COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Commissioner Perez-Andreesen. VICE CHAIR PEREZ-ANDREESEN: Yes. MS. TOPETE: Chairman Ahern. CHAIR AHERN: Yes. All righty, thank you. MS. ALLEN: Thank you. CHAIR AHERN: Moving on to.c, Network Firewall Refresh Procurement. And, Chris, good morning. MR. RIESEN: Good morning, Commissioners. Chris Riesen, Deputy Director of Information Technology Services Division. As you re aware, the Lottery s computer network is a critical component of conducting the day-to-day operations of the organization. Much of the Lottery s business operations and automated processes are highly dependent upon the Lottery computer network being available. These processes go on hours a day, seven days per week. And if the network is not available, Lottery sales could be impacted, and subsequently, our reputation could be damaged.

18 0 An integral part of all computer networks are the firewalls that perform essential security functions that protect the Lottery from threats. Industry best practice recommends the refresh or replacement of firewalls and other network equipment approximately every five years. The current firewalls and other related network components were implemented in 0, when the Lottery constructed our headquarters. In 0, Lottery Information Technology staff initiated a three-year project to refresh the aging network equipment at Headquarters, our secondary site, District offices, and the distribution centers. As part of this refresh, Lottery staff have been evaluating the latest firewall technology solutions based upon our needs of managing the Lottery s overall security profile. This evaluation included looking at the integration with the existing Lottery environment, system features, future incompatibility, ease of use, efficiency, security, and the financial impact. Based upon the results of the evaluation, the Lottery determined that Palo Alto Networks firewalls would best meet our needs and improve our ability to protect against external threats, inspect and block malicious network traffic, correlate application and

19 0 user activities across the network, and allow greater utilization of network traffic for critical, time-sensitive investigations. To procure the Palo Alto Networks firewalls, the Lottery competitively bid the solicitation by leveraging the State of California Multiple Award Schedule, or CMAS; and the procurement includes firewalls, associated parts, spare devices, three years of support, all necessary subscriptions, and training for Lottery staff. The selected vendor is Enterprise Networking Solutions, Incorporated, or ENS. And I d like to request Commission approval for the purchase of the Palo Alto Networks firewalls, with the total estimated cost not to exceed $00,000. Thank you for your consideration on this. And I ll be happy to take any questions. CHAIR AHERN: All right, do any of the commissioners have any questions or comments regarding.c? VICE CHAIR PEREZ-ANDREESEN: No questions. CHAIR AHERN: All right, does any member of the public want to address the Commission regarding.c? (No response) CHAIR AHERN: Do I hear a motion to approve Action Item.c, Network Firewall Refresh Procurement?

20 0 COMMISSIONER KIRTMAN: [Inaudible.] VICE CHAIR PEREZ-ANDREESEN: Second. MS. TOPETE: Commissioner Kirtman. COMMISSIONER KIRTMAN: Yes. MS. TOPETE: Commissioner Libang-Bobila. COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Commissioner Perez-Andreesen. VICE CHAIR PEREZ-ANDREESEN: Yes. MS. TOPETE: Chairman Ahern. CHAIR AHERN: Yes. MR. RIESEN: Thank you, Commissioners. CHAIR AHERN: All righty. Moving on to Action Item.d, Amendment to Outside Counsel Contract for Real Estate Legal Services. Nicole? MS. SOLURI: Good morning, Commissioners. CHAIR AHERN: Good morning. VICE CHAIR PEREZ-ANDREESEN: Good morning. MS. SOLURI: Nicole Soluri, Chief Deputy Director and Acting Chief Counsel. I present Item.d, Amendment to Outside Counsel Contract for Real Estate Legal Services. The Lottery has a contract with law firm Diepenbrock Elkin Gleason, LLP, for legal services associated with our Facilities Master Plan real-estate 0

21 0 property purchases. Lottery Regulation section...e provides an exception to competitive bidding requirements for the retention of legal counsel. That being said, all outside counsel contracts require, and in this case, received, external approvals, including from the Attorney General s office. The term of the initial contract is from April th, 0, through April th, 0. The initial maximum authorized contract expenditure amount was $00,000. The contract was first amended in February 0 to reflect a law-firm name change. The contract was amended a second time in January 0 to increase the maximum authorized contract expenditure amount from $00,000. Although the original contract did not require Commission approval, Commission approval is needed for this third amendment because the estimated value of the contract will now exceed $0,000. The original and amended maximum authorized contract expenditure amounts were based on projected estimates for work required for each replacement property. However, the Lottery entered into several purchase agreements over the course of the contract that were terminated early -- or excuse me -- late in the

22 0 process, based on the result of the Lottery s due diligence investigations. Certain transactions were also more complicated than anticipated. Accordingly, more work has been required under this contract than was previously projected. Diepenbrock has provided consistent exceptional service throughout the contract term. The Lottery is requesting that the maximum authorized contract expenditure amount be increased by $,000, as there remains insufficient funds to complete the remaining transactions specified in the Lottery s Facilities Master Plan. Barring unforeseen circumstances, this should ensure that all property purchases under the Facilities Master Plan are completed by the end of the contract term. Lottery staff recommends that the Lottery Commission approve this amendment of the contract for real-estate legal services to increase the maximum authorized contract expenditure amount by $,000, to a new total of $0,000. I m happy to take questions at this time. CHAIR AHERN: Do any of the commissioners have any questions or comments regarding.d? COMMISSIONER KIRTMAN: No questions.

23 0 COMMISSIONER LIBANG-BOBILA: No questions. CHAIR AHERN: And does any member of the public want to address the Commission at this time regarding Action Item.d? (No response) CHAIR AHERN: Do I hear a motion to approve Action Item.d, Amendment on Outside Counsel Contract for Real Estate Legal Services? VICE CHAIR PEREZ-ANDREESEN: I ll [inaudible]. COMMISSIONER LIBANG-BOBILA: Second. MS. TOPETE: Commissioner Kirtman. COMMISSIONER KIRTMAN: Yes. MS. TOPETE: Commissioner Libang-Bobila. COMMISSIONER LIBANG-BOBILA: Yes. MS. TOPETE: Commissioner Perez-Andreesen. VICE CHAIR PEREZ-ANDREESEN: Yes. MS. TOPETE: Chairman Ahern. CHAIR AHERN: Yes. MS. SOLURI: Thank you, Commissioners. CHAIR AHERN: All righty, Nicole. Thank you. All right, Item Number, and next on the agenda, is Commissioner General Discussion. Any commissioners have anything they d like to bring up at this time? COMMISSIONER KIRTMAN: None from me.

24 COMMISSIONER LIBANG-BOBILA: None from me. CHAIR AHERN: Okay. Moving on to Number, we have scheduled meetings. We have tentatively scheduled Commission meetings on January th, March nd, May th, and June st of 0, all in Sacramento. I have Number, Public Discussion. (No response) CHAIR AHERN: Seeing none, I will move on to adjournment. Without any other comments, Nicole, are we done? Okay, we ve done good. We ll be adjourned. Thank you very much for your attendance. Do you want to hit the mound? (Gavel sounded) (The California State Lottery Commission meeting concluded.) --o0o-- 0

25 TRANSCRIBER S CERTIFICATE This is to certify that: I transcribed to the best of my ability from an audio file provided to me by the California State Lottery Commission; and the foregoing pages to, inclusive, contain a full statement and record of said audio recording. In witness whereof, I have hereunto set my hand on the 0 th day of November 0. Cathy S. Dizon 0