ALC-Lottery Oversight Subcommittee

You make. All members and non members I'm going to give us to eight thirty five which is one more minute and then we'll get started soon just hold on a minute. Mr Weasley if you would just go ahead and come on up front to the that way for me start to moving you'll already be in your seat because. You're pretty much the whole show today and eventually ms business description Okay right all right. I know you don't you may take it off while. Nobody else is there with you it's okay your properly distanced. A good morning everybody and I I do want to start this meeting with an explanation and apology in a way because Representative Chris wristed Chris sent god knows I want to say Chris Christie that's a whole nother human being Chris Richey and I I tear this this This committee and and I I have been a bit preoccupied no question about that and I thought he might be chair the meeting and what we just misfire didn't and communicating otherwise we would have had it probably at an earlier time so I want to appreciate those of you who were here there was nothing nefarious about it other than we just human we messed up and I went on that and not put it on anybody else so thank you for being here in the event that we don't get a quorum here if I don't see a quorum before this is all said and done we will have our discussion today and you know there is a vote anyway and council so we might just have to take it to counsel for a boat but we will carry on with our discussion here today never the less and we basically today have reports from from Mister Weasley and then of course the one item on here item D. that is an item on which we will have to vote that's the the review of the an extension of the contract is wait amounts to item item D. so with that in mind I'll call this meeting to order and I don't have any further comments and we will we're prepared to begin Mr loosely if you will go ahead and start with the item D. if everybody will will get that out be prepared for that this is an update for you see and what you see update that's exactly what it means. Starting with city I yes your your starting on C. yes ma'am bishop Rosalie the director of the Arkansas lottery. First up is our. Excuse me our income statement update as always we begin with the comparison of this past month versus same months of last year. As you can see our instance games sold fifty two million dollars this past may that was about twenty point two million dollars over the same month last year it was the high sense and ticket month we ever had so that was obviously a substantial and dramatic increase in sales over that time by the way stop me if you have questions and happy to answer anything. we also had an excellent Munson draw games we sold eight point three million dollars worth of drug games verses eight point five may of two thousand nineteen both of those months uh had a mega millions jackpot that was substantial so that's why they're so and compatible we also international state jackpot I believe in the beginning of that month that was also quite high if you'll notice there is a substantial difference in retailer fees on other forty eight thousand may of nineteen verses may of two thousand twenty. In order to help our retailers out when the code red virus came to Arkansas we suspended fees for a period of ninety days given that they were gonna hard time so that's the difference in in that that suspension will in I believe June thirtieth so we will begin collecting fees again at that time. Obviously with operating expense anytime you sell more you pay more so we paid more prizes we paid about fifteen million more prizes for instant tickets about the same hundred twenty nine thousand dollars difference and prizes for draw games are retailer commissions we pay them five point six cents out of every dollar they say also when they sell more or commissions go up. Gaming contract costs or what we pay our vendors again obviously when sales go up they get paid more and marketing and advertising went up as well because we did our beneficiary campaign this past month we pulled back on most of our gaming advertising during that time we did advertise the ever the mega millions jackpot a little bit and that is mainly because it is a more profitable game and we wanted to be able to help us with our percentage that we sometimes are criticized for. but otherwise it was all. Deadline scholarship deadline and beneficiary campaigns that we ran during that time when we continue that right now we don't want to be in a situation where we're saying is trying to take advantage of a bad situation encouraging people play with that they should be doing other things general administrative expense was a little bit more I believe we have may be purchased some some laptops for the remote work we were a little bit short on on that so we had an emergency procurement of of some laptops during that time so that are people could work remotely. When it was all said and done our net proceeds without unclaimed prize amounts ended up about two hundred twenty two thousand dollars more than they did from the late same time last year. Actual verses budget again pretty wide ranging numbers there we did not anticipate the an instant ticket sales we had may obviously circumstance we've never seen before and and it's it's it's educating but it's just something we never anticipated or I hope never happens again frankly drug games we anticipated a good month we had a little bit better month than we anticipated which is about nine hundred fifty thousand dollars more and again the retailer fees we're down because we stop collecting them April and may and ends in June of this year again when sales go up all of the operating expenses go up because you're obviously paying more people for these commissions and things of that nature. Ultimately with net proceeds the result was that we had a month where we can we made about one point seven million more dollars and we dentist faded in net proceeds which is a good a good step for. For the year. I can tell you that we are about thirty million dollars a and it's to take its for the year at the beginning of April we were probably about two and a half million dollars up that'll show you what type of increase we've had over the last couple of months and that has continued. Slightly into June that is a good thing a bad thing is is this drug game years just and and in short been terrible we have just not enter it enjoyed the jackpot so we had in two thousand nineteen for give you an example I think the highs tech but we had this year was about four hundred and forty that million dollars in two thousand nineteen we had a one point five billion seven hundred seven hundred and fifty and a five hundred some odd million dollar jackpot so we just are having the lock at the end of may we had a jackpot for power ball which has really been struggling this year I think it got up to about a hundred fifty million and it got hit and then the very next draw twenty million got it which is just unheard of we have something in the industry which is called coverage which is the likelihood given the number of tickets sold that the jackpot is going to get hit typically you're going to see coverage in the thirties forties when Jack was gonna fight we had I think seven or eight Jack was in power ball hit at five percent coverage this year so they just never got going hopefully that'll change but it is just been an abysmal year from the jackpot standpoint. Again were up to the about one point seven total I think you'll find that for next month if this trend continues were about eight million up now as of today but this was as the end of the message as of the end of May now down the net proceeds you see there's a difference so why FOR up this year we down the net proceeds or you take the thirty million dollars that were up an instant tickets and we make a whole lot less offense and take is and we do off of drug game ticket so if you took the twenty eight million dollars that we're down and drug games we typically make probably about thirty five cents to forty cents off a dollar off of those games so if you I'm not good at multiplying on the run somebody here probably a lot better than I am but if you take about thirty five percent twenty eight million dollars that'll tell you exactly it's probably in the range of eight or nine million dollars that we didn't make because our draw games sales were so poor this year so that's the reason that we're down a net proceeds versus last year which was a record year about ten million dollars. Verses budget we are doing well total revenues were up about twenty one million dollars were not nearly as down and draw games we anticipated we recognize the two thousand nineteen was a year and draw games that was unprecedented we did not budget as though that was going to continue thank goodness so we did have the foresight but we didn't know how bad it was going to be so we budgeted about to think about eighty nine million dollars for the year and as of the end of may we were down about nine million we're gonna make up a little bit on that because we did have a decent mega millions run at the end of may beginning of June but it is just not been a very good year for drug addicts. For total revenues were up about twenty one million dollars. And FOR net proceeds down at the bottom were down about one point seven and that does not include unclaimed prizes which you'll see on the next live or where we stand with that. So where does this put us on the transfer analysis and and sales standpoint for the year as you can see on the far right became a little balance as been read pretty much all Levin months of the year ten months the year up until may and finally we got our head above water with made to the point where now we're up about a hundred seventy one thousand dollars we anticipated I believe that we would make eighty nine point two or three million dollars in scholarship revenue are proceeds for this year that means at this point we're on target to hit that we're having an excellent June field block on wood for you don't have a huge prize commander something come up that we didn't anticipate probably gonna at least finish it what we budget hopefully a little bit more. So that is my. As in Tatian for the LOC reports I'm happy to answer any questions anybody has thank you so much I'm members I also for I forgot to tell you that there is another meeting in this room that tends to be out by nine forty five just so you'll be aware of that I just have one question before I go to address the members Mister Wesley so the for this fees that have been suspended for now and your anticipation is that you're with you will resume that when remind me of that date again the June thirtieth July first to July third is is and are you looking at that as and kind of an iron clad thing there is that also going to be informed by what are not things actually got better regarding the pandemic we have the ability under our rules to suspend them at any time there is one for you that we do have to collect slips my mind what it is but I can't get it basically says we have to collect something so we collect that a dollar as opposed to fifty or a hundred whatever it may be we have the ability to suspend that that is not something that is a huge revenue maker is something that helps us with some of the processing and things of that nature we have a communication fee that helps pay for our system but it is not something to wear it's a big money maker for the law we don't want to make money off for retailers we we stay sell our tickets we want to be a good partner and we recognized we made this decision the third week of March which. I know all of you were like may I have no idea what was going to happen in the and it's become a lot clearer sense and so we just wanted to do the best we could for them and that's why we did it and if it if we get back in a situation where things are. We have a shelter in place or something happens to where we have a increases dramatic increase water I don't get in the but if if things happen that we need to do that okay we are we have a couple questions senator flowers. by miss if I can get you tuned up here so the farms checking my consent required she actually Senator hammer Senate member in her okay Senator hammer I can hear you so go ahead thank you madam and to that point that you were just talking about on stopping collecting the retailer fees. What's the price tag associated with that do you have the estimate or did I miss it it just it just depends what timing of the year so when we started up we started up in August September so the bulk of all of our retailers have their renewals every August September to two year licensed so we have a five dollar we communication fee which is across the board that we stopped collected we had a depending on your licensing during that time there's a lot there's a renewal fee of fifty dollars there is a bond fee of a hundred dollars so depending on the time of the year it's more or less based on when you do it so for this for for for this period I think it was about a fifty thousand dollar hit that we to a because there may have been two or three hundred retailers that we're gonna license during that time or had the renewal period so if we were if you want me to tell you what a big it would be a B. August or September because that's when we started up the mess from the bulk of our nineteen hundred and seventy some odd retailers over to. Okay and then the transit were experiencing here in the state how do they compare to what the trends of other states are we kind of you know in the middle of Packer we lead the Packer based on the transit you see through Lester three months where would you put as compared against other states those those areas in the northeast that were hit first and had shelter in place orders and have a huge draw or social game environment to where if you had to go to a bar tavern restaurant restaurant to play a game or the ace relied heavily on power more mega millions were devastated we initially had about a two week yet and I think it was more based on uncertainty than just anything else people just didn't know what was going to happen. And then probably in about the first or second week of April we saw getting back to normal and even a little bit of a dramatic increase an instant ticket sales so for nationwide I believe were probably the top quarter of recovery so to speak we've saying that softened a little bit here in the last week or so I think if you look at that six or eight week period restaurants to close movie theaters for close the casinos were closed a lot of people were just looking for something to do and if you could run on conveying storm by few tickets and entertain yourself for thirty minutes or so I think that's what would benefit but to answer your question we're in the top corner but everyone seems to be getting right again so to speak with the exception of draw games which are just terrible across the board okay thanks. Sure you're welcome. Let me make sure that this thing whose NC seventeen. Okay you're recognized. Thank you madam chair up just a quick question here on interest income and other income I noticed year over year and against budget to that's down quite a bit and a year to date you're you're better than budget but why is that way down for the month. Well interest rates have dropped to nothing so last year at the same time interest rates for pretty good or not I'm not I'm going to begin the trying recite what they wore that's one of the reasons draw games are down this because they rely on interest rates of annuities to build up the jackpot so one of the reasons draw games went down is because the interest rates decreased dramatically over the last six or eight months especially I guess the last two three months I think the fed just basically made to nothing so our money in our bank accounts are drawing nothing right now not nothing but over a much lower rate than what they were and that is the reason why that that decrease after okay thank. Any other I don't have anybody else so for question So I thank you miss was Lee if there are no further questions we will consider this report reviewed and that moves us on to item D. which is if this is about the extension of the contract and we actually have our budget to this part of city that I can go through real quick okay all right let's go ahead and do that then yeah. I'm looking at paying closer to and your budget packet that is what I'll be reading from it is a a brief summary of our budget and how it compares to. Last year and what we project and for those of you like me and can't see that well this latter appears a little bit bigger version of that. So as you can see Instant ticket games and our budget we have basically said that they will be flat we have seen an increase over the last two months I don't anticipate that is going to continue I'm not really well versed and and some of the benefits and unemployment and job numbers that are out there but as I understand it at the end of July some of these benefits may and then people may be trying to go back to work or or continue to be out of work and not receiving benefits I don't know so for the uncertainty we just chose to and we did this budget it's the end of March in the middle of April when there was a lot more certainly so from instant ticket standpoint we decided to have a flat year that's what we think the trends will require and that's what we think there will be so essentially from that standpoint we went flat. Online games as you can see we budgeted this year eighty nine million we're probably not going to make that but we'll come close but for next year we budgeted fifty nine million dollars and that is dramatic. and one of the main reasons is and I don't remember the exact date but I believe it was the first or second week of April. The multi state organizations all that mega millions and Powerball it already had a rough year. We're not growing at a rate that was going to encourage sales the jackpots we're not growing but we had built in. Built in requirements FOR role so for instance with power ball it began at forty million. And we had a required role of ten million up two hundred and fifty million. Well we got to the point where we saw that are actual sales were not supporting those ten million dollar roll so if it went to a hundred fifty million you start getting into a situation although they have reserves where if a jackpot gets large and it grows based on our rules but not based on our sales. Then the states could have liability if that jackpot gets here in other words if the jackpot grows to five six hundred million dollars in the sales are only for four hundred million dollars somebody's got to pay for that so the multi state games all went back and decided to reduce the starting jackpot to twenty million dollars. Actually we have discretion for to be lower but that's been the the benchmark. And to reduce the Max or the minimum roles to whatever the group decides based on sales which is a good thing because it reduces our liability in this and still unstable time it's a bad thing because it's taking longer for those games to get to large jackpots and it takes those large jackpots to get sales I don't know how long that will continue there's a lot of uncertainty from that standpoint and with those being games that we rely on we just reduced our them out we thought we would like to be cautious I'm hoping I'm wrong here probably the only agency director of going to present I hope I'm wrong in my budget but flat standpoint open world. that is about the bare minimum that we thought would happen so hopefully I'll be coming back to you in the next two three four months and saying I was an idiot and and did a bad job of budgeting draw games but we wanted to be alter conscience conscious of the fact that there's a lot of unknowns out there right now. we have a proper motional discount that we have every year it allows us to run promotions for our retailers to encourage them sell tickets we some years we do it some years we do not we've run promotional promotions for retailers in the amount about two hundred twenty five thousand dollars so far this year so we may or may not use that it's just there for we needed and it has been a good thing and it's been something we haven't had to use some years so that's part of that Requirements retailer application binding fees again we budgeted just as a little bit less given what senator Elliott just said which is we may come back at some point to so I we need to spend those fees again to help them out we have a lot of independent stores we don't wanna over burden them with fees and things of that nature especially in times when when they're having problems so we reduce that a little bit as well non gaming revenue is is things that over we get unclaimed property notices and things of that nature is income we can't count on but we do occasionally get money that was an anticipated and it is we just budget is small enough that every year so all told instead of the four hundred ninety seven million that we anticipated this year we've reduced our sales projection four hundred sixty five million and the majority of that is solely based on the drop in draw games. When you have drops and and games your prize liability is is set to decrease so you can see because we're flat an instant ticket games we anticipate will have a member about the same prize liability that we had before. When you have a drop in online games significant enough that we're putting in this budget you see that the drop in online prizes is significant as well it went from about forty six million and our budget to twenty to thirty two and again you go down to Gunter a retailer commissions and game contract cost those drop as well because they're paid on what the sale and how much we sale. staff compensation benefits we're worked at the same level that we were same amount of employees same amount of positions things of that nature so nothing changes there advertising marketing and promotions last year we had a budget of eight million out of respect for just a situation where produce about five hundred thousand dollars again we don't want to be seen as is to run to take advantage of a a bad situation we do need to market our games we do need to market scholarships the deadlines but we have been very conscious of that during this time and doing everything we can to kind of avoid any appearance that we are are are doing anything that would be inappropriate at this time. general administrative expenses those of dropped a little bit. Lord Jordy of that is the Camelot contracts that is not considered a gaming cost because it is based on the amount of proceeds if you approve a review this contractor about to give you those costs will drop significantly as well so that is why we have the difference in that cost services provided by other agencies as legislative audit department of higher education we intend we expect those will remain somewhat flat. legal professional services. We very seldom need any of this but sometimes we have to pay for collections or things of that nature so that is that is what is related to that capital asset depreciation again we just purchased quite a few laptops I'm not good enough accounting but evidently you depreciate those over a course of time in any new equipment you have and then that is why that is around three hundred eighty three thousand as you can see our budget for last year four hundred dance is not really that much difference in that as well so total operating expenses of three hundred eighty eight million dollars is supposed to operating revenues of four hundred sixty five million that would leave operating income around seventy seven point five million interest income represent Ladyman there yeah there you say this is the six hundred seventy thousand verses a two point five or two million that's actually a pretty big get force we had had a very good year in interest income over the last two years and that is just dropped off the map hopefully that will. Change. So with our income before transfers as you can see word about seventy eight million. and that is where we will basically and which is about seventy eight point two million dollars for scholarships versus eighty nine this year so you can see what type of change we are budgeting for again hope I come back in three or four months and I was dead wrong but we need to expect the worst hope for the best in the situation so that is my budget presentation I'm happy to answer any questions that anyone has related. The I thank you I think that Senator hammer. Yes thank you on your suspending collection the retailer fees that doesn't. To spend what they make of some of the ticket so right no Sir okay so it's gonna be a little bit of a windfall for them in that they're not have pay those fees but their continued to collect the. Yes our I would anticipate the retailers fees over the course of the year since fifty dollars for renewal hundred dollar bond for the Your total fees maybe two two hundred fifty dollars a year so that would that they would benefit that if we suspended again in this next fiscal year okay and the only one thing I'd be concerned about that is what you mention while gold you said a hundred dollars for their bond fee I think it was that that does mean you're not requiring them to have be bonded it's just you're not collecting fear how to how does that work we we haven't had bonds for retailers in about five years we are self insured and we have an insurance pull of self funding that is equal to five hundred thousand dollars and just to brag on my counting staff of this land be entirely Kirk but in ten and a half years we have had a loss of about a hundred thousand dollars or four point five billion dollars sold select very impressive and never come out of scholarships is going towards the barn fee so. It's really at zero net loss okay thank you the major I'm sorry thank you I don't have any more questions on the board so we will consider I do in my seat to review and that takes us on to item D. and. Mr always late if Mr screen charge going to join you for this you might come on up at that this case and what I would like for you to do up when we get started members you may notice that you have for items under yep four DB documents not no it's five. Forty five the documents. Six I keep going here seven yeah keep going here so before you get started just so members will have some sense of continuity would you just tell let members know what each of those documents is I don't want explanation just just let everybody know what each of those dot is so we won't know what's expected and I think they'll have funds to the flow of our conversation. In two thousand. Fifteen sixteen Estes contrivance you introduce your sorrows thank you just for the record thank you madam chair John the screen shot of vice president commercial operations for coming up local north American. You may proceed so exhibit a in two thousand fifteen the lottery put out an RFQ for consultancy services to help us with all areas of our marketing advertising gaming retail execution branding basically public opinion of the lottery that was put out and Camelot was awarded the contract so exhibit a is the original or if you. Okay. So I am reading the original exhibits from to we had a different labeling is that what it is yes ma'am okay alright he has everything that we has now okay very good okay so there was an or if you for consulting services. The response from Camelot is attached which is what we graded in two thousand fifteen they were eventually awarded that contract. Exhibit the four is an agreement for contractual services which we can we gave them which outlines the basic terms of the original agreement which more or less for for five years they were paid a base compensation amount of not more than six hundred fifty thousand dollars a year and what that is for is any services man hours that we requested up to six hundred fifty thousand dollars they would provide us every year in the beginning of the contract that equals roughly six hundred fifty thousand has decreased every year as we have needed them a little bit less or there's been less requirements of of Camelot I think last couple of years of been somewhere in the neighborhood of three hundred thousand this may be a little bit less this year as well so that is decreased over time we also pay them their travel they have individuals who would come here and stay for a week or two or three weeks at a time we would pay for them to state their flights things of that nature that has reduced obviously significantly as well with Well some of just for the fact that people are traveling right now but some of it just the fact that they are coming here quite as often Mr Gramm charge here on a permanent basis so he's in the office with us so we don't pay for his travel. We and in addition to the base compensation we paid them an incentive compensation amount which was based on how much we made basically and proceeds it's the different calculation of income for transfers but we pay them a certain percentage above seventy two million dollars. And then when that that amount reached The fund to the they're above the. Seventy two million dollars we pay them twelve point five percent of adjusted operating income when proceeds reached eighty million dollars we pay them thirteen point seven five percent of operating income and if it exceeded ninety million dollars week paid them fifteen percent of operating income so their contract the bulk of their payments were based on our success sometime sales can be well but you're not necessarily raising a lot and proceeds so the structure of the contract was that if you come in you help us and we actually improve the amount of money that we raise for scholarships then you'll be Payton benefit from that other than a good partner well we've had some success you know I think as John said success as many mothers we have other vendors so when we have an excellent staff so we've had some success success over the last few years and and have benefited from our relationship the first amendment I don't I thought I believe we had an actual incorrect information in the initial so we had to do an amendment within the first week to correct that that's all this first amendment is which is exhibit the five. Exhibit the six is the actual proposed amendment or extension rather to the contract and what we try to do is take into account the original contract was five years we had a requirement or allowance to do a two year extension. We have decided to award that two year extension pending obvious review from the LOC and negotiating that we begin negotiating that in December and you know obviously with the Goshen ation you go back and forth things change over time and I think about the time that we were starting to settle in all agreement covert showed up in that change the complete course of a lot of this what we tried to do is be fair and incentivize them for their work but also understand that we're five years down the road from where we were we've improved we still have we can always improve but we have improved across the board what we've done with our games what we've done with our advertising marketing or branding retail execution they've helped us with our responsible gaming programs so across the board we feel like we've improved and in the new normal which is we actually have a better trend of what we make for scholarships but you have to couple that with the uncertainty of the next two years so we tried to factor in that we are. Beck thing to do well but you look at the next year and you really don't know what else is out there. So. Skews me in light of that we maintain the base compensation of six hundred fifty thousand dollars I do not anticipate we will need that much from them but there's a maximum six hundred and fifty thousand dollars we no longer will pay them for their travel they will eat that cost if there is any travel or or individual staying here in hotels. Excuse me. We were they will provide us official reconciliation every six months to where we even up on we your crew that we're paying them but we even up every six months to make sure that what they're being paid is correct and and and that we are refunded or we pay them more based on whatever where we stand and then just as it hit interrupted so whatever that reconciliation shows that with that be something that will be reported to the oversight committee. All right so you anticipate if you take six hundred fifty anticipate six months you're you're paying three twenty five but we're really probably not unless a special project comes open that we need more help so if at the end of six months we've paid a hundred twenty five as to the three twenty five we build that into adjusting their fees adjusting what we pay them on their incentive compensation okay sure. So. What we decided on is because of the uncertainty instead of setting just random numbers that they would be compensated on we would base that on what our budget was each year so next year for budget is better they'll be paid based on the budget plus whatever the percentage is our budget this year seventy eight point two million dollars. We went in and figured out What their previous payments were what that look like skews I'll go and this gave you the scenario I is a current contract it's appear scenario B. is this contract that we're proposing in the in the previous contract it was based on seventy two million dollars as a base where they would start being paid as you can see this new contract up to seventy eight seventy nine or seventy eight point two there will be paid nothing previous contract they would of already made seven hundred and eight thirty nine thousand dollars so we Senate for our budget. Over seventy eight two million dollars be paid eleven point five percent. Of all NET operating revenue up to eighty eight million dollars which is less than what they've been paid previously. If we are by chance hopefully I'm come back and we're on course to make eighty eight million dollars and proceeds they will be paid twenty percent above that so as you will we will went down the scenario for every million dollars we showed them what they would be paid so on the left is the section a or scenario I is the old contracts scenario B. as in the contract so as you can see as you go along with their being paid an incentive compensation for lower numbers is significantly less than what they would be paid in the in the current contract. So what we try to do is again be fair I understand they will be contributing but understanding also that with with with the times and the projection for low proceeds we also wanted them to skews skews me work harder for their money and help us to make sure we don't make seventy eight million dollars so there's a carrot at the end of this so to speak to where if we make more and is because their help they'll make more as well the other thing we did. Was it recognizing that. There are times when we have hijacked parts and when those jackpots at five hundred six hundred seven hundred or billion dollars. Obviously we have hijacked by strategies and there's things you can do to encourage sales but a lot of that is based on national media whether or not the media picks it up and people get excited about the jackpot so it's not that we can't do anything but at a certain point it gets out of your hands and it becomes its own it gets its own moment. And what we want to do is instead of them benefiting from justice excitement of players and then coming out and being excited about buying jackpots that they would be placed pay based on what our other vendors are paid for jackpot runs of that nature or other. Use me other vendors are paid on a percentage of sales. What we try to do is go in and take how they are paid based on operating income okay what's called the just operating income. Try to make those the same so you take what we're paying or other vendors which is the sales commission. And you take what they're being paid and make those to the same so what we came up with this once a jackpot reaches four hundred million dollars you throw out these eleven and twenty percent numbers for those proceeds and stuff we make forty cents out of every dollar for power bar mega millions jackpot they're gonna get four percent of that forty cents out of the dollar under the current contract I think they would have been paid about four have center so out of every dollar and and. Jack but proceeds instead they're being paid one point six cents so as you can send that may not sound like much. But when you make eight or nine million dollars off of the jackpot one have sense out of eight over every dollar for eight million dollars is pretty significant. So again we want them to be compensated we also didn't want them to be compensated more there other button under other vendors are also contributing. Use me sorry We also anticipate that there may be launches that our earth of new games are new tickets that are anticipated in this budget so for whatever reason we decided halfway through the year that we were going to launch a game that is not built into our seventy eight point two million dollars but they're being paid on our seventy eight point two million dollars that they wouldn't benefit just for the simple fact that the lottery industry we had come up with some great new idea and it just so happens they're gonna make money by virtue of the fact that we do Saturday games going to make more money. So we will agree if we do such a skews me again. If we do at such a game with someone to help you it wouldn't hurt me for okay if we did add such you Sam okay that. We would sit down and negotiate a price that they would be paid out of that new game so it's fair to everybody it would be something where even if they did nothing to help that game they would make money off of it so that is what we came up with that so we would come back it's likely to be probably based on what they're gonna do and and if it's going to be substantial to probably be just built and what we what we cut right now but we wanted to make sure that that didn't happen so if there's a new game over what we currently do thank you very much then we will sit down and go sit with them to make it fair to them with FOR also to our or retailers and our students The same goes for any in state draw game that we are currently playing if we decide to want something like that will sit down to negotiate that for you as well. Your to I was somewhat reluctant to dedicate ourselves to any type of payment structure just because we don't know I mean this may continue it may not it may get better I don't want to go she eight and the dark and I felt like I would be setting a price that would not be based on anything that I had any knowledge of. So I will be coming back to you I think we decided we would sit down by April first. And that's about the time we can with our budget and ask you again to approve a review the year for the second year yes ma'am there's just so much uncertainty I think you'll be responsible me to to do anything like that. It also allows for termination feature that we didn't previously have previously to their credit the termination was was structured such that if we don't got all of their knowledge and and so well thank you Camelot bye bye and we benefit from that knowledge they would be paid based on the the secret sauce the secret things they gave us to the strategies they gave us. I think we all recognize now that we we know you know we've been dating for five years we know each other pretty well and so we agreed that there's not necessarily any type of or maybe there is but there's not necessarily type of secret sauce that they're going to give us that we could then say bye bye Camelot thank you for giving us the the the you know a reason for to increase sales so we just have a basically thirty thirty day termination requirement here so if we decide to part company was Camelot we just can turn or they decide to part company with us we can just terminate and not have any type of penalty type clauses where we would have to continue to play them based on the the proprietary information they gave us. again they'll continue to help us with our business plan they'll continue to provide us any ad hoc services we want anything that is needed any reporting research insight things of that nature they'll they'll give us a personnel that we asked for obviously based on a rate that is within that six hundred fifty thousand dollars and will continue to move towards a digital business plan data platform analytical services and and things of that nature so. The gist of this the as we continue to have pretty much the same relationship at a reduced cost and you know most of that reduce cost is based on our educational the last five years and I think what we tried to do was take the current situation and incentivize them to some extent but maybe not not as much as they were for the first five years so I'm happy to answer any questions based on that let me start I have a question about the termination part of this. was there any particular thing that happened that cause you to want to put up this first this provision in the contract. and yeah let's just start there I think by law house bill also is a practice that I think by law any state contract has ever provision for termination. You get to determine is there a range within say sixty days thirty days thirty days thirty days okay I've seen that as meet online I don't know the law about I think theoretically and we're not appropriate agency and you don't want to get into a situation where you're not a good partner but the conflict the state the legislature could come back and refused to appropriate a contract and therefore those calls have to be in state contracts because you could say you know what this contract has not been for the state we're going to terminate this you got to thirty day termination clause in there. We had that in the previous one. We did have to give notice but it if it happened during a certain time in the five years like I said if they came in and gave us all the secrets and then we said okay we got him on now so bye bye Camelot we could benefit from that if we if if we took those acres and implementing them and and made a lot of money off of them that would be. Yeah stealing their proprietary information so that was why that was structures that way and like I said we feel like we've reached a point where we've gotten most of the not most a lot of their knowledge to where now if we terminated it would just be a clean break to where we didn't have to do that so and secondly are you anticipating any particular kinds of games of might come along that we might add new games that well that you know we have talked about keno there's been recommendations came or obviously that's not a done deal we we're will we have people to talk to about that and and and other things to go I don't scare anybody. The the the future requires a lot of Texas in remote purchasing so we've we've considered and I lottery situation and again nine that's not eminent but. Consumer behavior is changing people are you know if any of you have bought your groceries at Walmart by pulling up in the in the parking lot and telling your here in the delivery room consumer behavior is changing and if we are in a situation where this continues and people are not wanting to go to stores and people not wanting your C. stores that's where we sell our tickets other states in the industry have the ability to do a lottery they're all lottery sales one of thirty to forty percent during this time period we have long in the industry said well we need to be prepared for the future but we never had the data to say. This is the future and this is what you can benefit from and now we do so again. What will go Sir will jump through all the hoops to do anything that we we want to and if people say no we will go back and come up with something else now what would you would you just remind the committee it would if you decide to add say for example keno and the other games is that something that you bring back to the oversight committee it is not because you know I'm sorry I'm I just got I just do you have the autonomy to add that and and just report to us title so yes ma'am we can most definitely if you remember we got our hands left back three thousand four. Remember I've learned a lot less. I'm not going to And at that time. This body put a. Probably about an eight month moratorium on keno on a special session where. Maybe what was a special session we all met over the old state house what was it four was that for the Arkansas works for I I don't remember it was just hot. Teachers insurance what's that we get the insurance somebody said we got thrown on that call then then very well and so can I was temporarily banned and then that moratorium was lifted in that next general session and we stayed away from it it is better our business plan it was in the fifth or six year the business plan drug games are in such a state and that to draw game lottery would be considered a drug gang to where if I'm just if I'm just stuck with part one mega millions they're just not doing well and I don't know that I can't predict the future so. If this continues we're gonna have to look at alternatives so those are things that we might bring back and say. Would anyone be out rage if we if we did this so we are at the point where within Sinn tickets we have not released a new price point of instant tickets since April of two thousand eleven. Nine years the only thing left for us to do is a twenty five or thirty dollar ticket I don't want to one but if we don't have any other. Magic bullets to pull out. I'm going to reach a point if the expectation as we continue to increase sales were up of the eyes we would reach the point where You got to grow you got to grow your catalog to continue to grow well I guess that now has of the world changing around you that's something that we all have to consider whether we do or not I can tell you the last three months I have been inundated. With vendors. Having touchless solutions if you go to come and go and you pull up in the parking lot there are two little placards that save two spaces for people who have ordered mobile. The and if you go to Sir okay saying there other vendors are doing that there are Kroger and and Walmart two obviously already do that click it and pick it up it's called opus by online pick up in store. That is the wave of the future. We have to be in that we have to somehow be and that it will be left behind and we're going to do anything that anyone objects to but we do have to be. Cognizant of the fact that will be left behind. Connect me asked me what I do so again we will jump through hoops we need to jump all right with any tax if anybody anybody have but I don't have anybody teed up your for question. Was he so good that you understood everything he said. Thank you have a great day Sir thank To be sure well is miss from charter do you have any any comments you'd like to make a no ma'am I think the director was the Senate that a fantastic job just to say and I know it sounds ACT excuse me a cliche but you know we thoroughly being proud of of all time he and we do like to to being a place now we can start to start the the an extension in July so thank you very much alright you're you're welcome not members this is item on which we do have to make a recommendation have to vote in and and have been discussion but you wish to lab if there are not any questions and I don't have anybody teed up I need a motion to accept or reject the The extension recommendation to the Legislative Council motion. So we have a motion. Okay are a motion and there's a segment on a motion the second but I see all this right the right way. All right there we have a motion the second all those in favor I. Those opposed no. All right so we will certainly takes is to counsel and recommended a passage Mister loosely and if there is Nothing else for you to be said about that then we will I thank you so much for your presentation and I I would I would absolutely say since we kind of had a little trouble here and making sure that we got this and under the under the gun I would say let's be prepared for your presentation today was good and very thoughtful of just presenting this is what's old this is what's new the prepared for it just in case the council needs more tomorrow because I recognize they're getting this kind of a short time to maybe do the same kind of presentation so with that we will move on then to item he. That's another update. Thank was searching for what you're going to tell us. see. Okay because you have your so are label differently maybe is that where we have to reconcile our business okay looks like this. I'm Miller Mr Scrimgeour go through each of the committee had to a question all right all right Mrs gonna try you're right you're recognized thank you madam chair so yes we were almost at the the lost LOC two returned with a Kanhai that a little bit more detail to the very high level plans that I I touched on for FY twenty one in particular at the at the at the Los the laci and basically what you what you have in front of you over a number of pages it's a kind of the key headlines for delivery in a in FY twenty one I'm. I believe that mendeecees being in the LHC for some time now that we we we talk about our I'll strategic palace of of of games both instance and droll brand marketing retail and then what we call player relationships and Some of what you will see and hear is east is very much a continuation of the of the great what that's been done over the last five years but particularly last year and the year before there are is issued mentioned in jewel games some new game developments the planned I'm one of those is keen in which I think we did some consuming needs mapping without getting too cliche around the fact that there is a definite opportunity within Arkansas full that gang I as you think you could also help what may well be some floundering balls in taverns in the in the near future because a we see they've been very but very badly affected by the the current that current of ours there's also some changes plans you will see to the multi state games bishop already spoke about the fact that payable to mega millions of our under little pressure at the moment and they all going to have to make some changes to that game or that game structure because I think not just Arkansas but overall the irrational to is it going to be demanding that because it's a it's a highly profitable area of that business that at the moment sales all all significantly down. Without getting as a say into into into every detail here around the brand of marketing just pull this back up so. Our brand of marketing this and some very exciting developments on new creatives for the for that cut for advertising there was a marketing meeting yesterday with the advertising agency who have really pulls into to what we're trying to achieve in respective of a new and it haunts the version of the that this is winning and campaign that you hopefully will have seen on on television heard on radio or even on social media over the last year is and there's also a greater focus and we were talking about the changing concealment towards digital marketing so these days you know people don't just sit and watch television and even if they do they can watch hundreds of different channels it's very hard to communicate with with with consumers beauty based on trying to advertise on television there's a lot more on social media a lot more on on push notifications that way you get something on your five and eight sexual we will know what what how it works because we get pop up to amend is on all the time saying I believe he was looking to purchase this product so that's going to be a real focus on on digital marketing and then on the retail side if we shouldn't we shouldn't forget that as as things stand a hundred percent of sales in Arkansas come through the retail channel is a very important area I think they've retail team has it's been out standing in the lost in the lost. Five years but said in the last two years bishop already touched on the kind of difficulty they wish you had in the last the last few months and and and even then they what they what kind of hot on that fines speaking to their retail is if they can actually go in and see them and and the results speak for themselves so there's that there's a real focus on on retail still we spoke about contactless and they're all still some retailers you don't take debit cards which is oversee something that the Legislative pasta back in two thousand seventeen I think I think this is an opportunity for that for those reset is to to maybe re look at that I think we can now prove that it it's to an event that works very well and those recess you take that the cause of seeing significant sales benefits but also I think that customers now welcome that as well so so there's a another area of retail that we looking at and then on the on the what we call the play relationship site really the big piece have for the common law and this is what bishop and I had a lot of conversations around on the negotiations as well is is there's an enormous amount of data that's available to any luxury to particularly oversee we focused on the Arkansas scholarship lottery but a lot of that day two is is quite fragmented it's hard to get to an even sort of some quite simple reports actually take quite a lot of effort to but she pulled together so one of the areas will be focused on is is trying to help the lottery with their reporting and their retail us Dimond's for report's being able six to get access to that a lot quicker and to actually start to use that the enormous amount of played a to that is available to to help for me like I'm for the plans and that's very important when looking to the future in terms of not just FY twenty one but at four twenty two am deal and that that that that the data and did you seal and insights A gonna be ever more critical to be able to reach you appeal consumers because the traditional means that that I remember being that I'm a fifty year old male of being able to watch for a fight. Channels and and and people communicate that way to me is just a very different it's very very different now and then of course if something like on a luxury should be approved then again the more the more that you have available incentive to to seven data enhancements the better. I'm John White where you have acronyms or abbreviations would you just spell out what those what that means like you'll see our yes on is it on the last one yes certainly madam chairman chair server CSL is is This is all about the I guess how would you put it with them without a five by my head was here so. To the service relations customer service associate customer service relations sorry honey went out of my head for a second that's me using it is too much so I ask you to do and that's what I said this is old oh sorry see a seller and this time he's cooled for is corporate social responsibility okay it right now this is about responsible gaming sufficient mentioned around the fact that we we put the luxury I'm we we with lots to be part of that that for the first time Rick credited with a the planning phase of a responsible count responsible gaming program and that was that nice please the is basically the north American society of luxuries and and C. P. G. is the National Council for problem gaming. and they've teamed up to basically ensure that a loss was a focus still almost points will gaming and as a state the Arkansas scholarship lottery stood up amongst you have some of the top coaches in a sum of the Bigelow to the Americans that we want to be part of this so we now cost the planning phase of that so we now in the implementation phase so everything that we kind of doing in terms of game developments and and the way that sales team operated sentries always done with it with a responsible gambling element apologies for the for the acronyms and that is to say to me a second to remember that says always yes corporate social responsibility okay. I'm and that's I think you in terms of a of as a kind of brief overview of the of the consumer plan the business plan for FY twenty one is is is well probably still I can obviously and all five issues we can always the going to fall prey to the Senate how we come up with these plans but this is currently where we've where we're at all actually mean that this is a novel just remind members I maybe don't know this is something we actually requested in one to see if we don't what the plan is down the road here and now so I don't I don't think there's a need right now for you to go into how you came up with it because unless somebody has particular question about any item on here but I appreciate your responding to requests of the of the committee does anybody have a question I don't have anybody teed up for anything. If if not and there's if there's nothing else either one of you has to add then we were just considered of this item updated and and review and thank you so much for your presentation if there is is there any other business from any members of the committee. If not we will stand adjourned thank you so much for being here at this early hour and at least looking at this be awake and and alert I appreciate you so much all right we'll see it tomorrow council.