Massachusetts State Lottery Commission 150 Mount Vernon Street, Suite 300 Dorchester, Massachusetts 02125 Tel: (781) 849-5555 Fax: (781) 849-5546 TTY: (781) 849-5678 Meeting Minutes DATE: Thursday, October 24, 2019 TIME: 10:30 a.m. MEMBERS PRESENT: Deborah Goldberg, Treasurer and Receiver General Meghan Liddy, Commissioner Andrew W. Maylor, Comptroller Anthony Salvidio, Commissioner (Remotely) Spencer Lord, Special Counsel, Executive Office of Public Safety and Security, designee of Secretary Thomas A. Turco III ALSO PRESENT: Michael Sweeney, Executive Director, Lottery David Falcone, Chief Operating Officer, Lottery Ed Farley, Chief Marketing Officer, Lottery Didier Bertola, Chief Financial Officer, Lottery Judy Moore, Senior Executive Assistant, Lottery Gregory Polin, General Counsel, Lottery Christian Teja, Director of Communications, Lottery Joshua Fredette, Senior Program Engagement Manager, Overture Partners, LLC Danny Bogus, Digital Consultant, Overture Partners, LLC Jeffrey Shapiro, Esquire, First Deputy Comptroller, Chief Operating Officer, Office of the Comptroller Sarah Kim, General Counsel, Treasury Chandra Allard, Chief of Staff, Treasury Lizandra Gomes, Deputy Chief of Staff, Treasury Alethea Harney, Communications Director, Treasury Emily Kowtoniuk, Deputy Legislative Director, Treasury Andrew Napolitano, Deputy Communications Director, Treasury Kathi Reinstein, Director of Policy & Legislative Affairs, Treasury Martha Goldsmith, Director, Office of Leasing and State Office Planning, Division of Capital Asset Management and Maintenance (DCAMM) 1 Debbie Russell, Project Manager, Division of Capital Asset Management and Maintenance (DCAMM) Maggie Cohen, Kearney Donovan and McGee Phil Wettengel, O'Neill and Associates Robert Frasca, Interested Member of the Public I. Opening of Meeting Treasurer Deborah Goldberg opened the Commission meeting at 10:41 a.m. Treasurer Goldberg stated, “pursuant to the Commonwealth’s Open Meeting Law, Massachusetts General Laws, Chapter 30A, Section 20, as the Chair of the Massachusetts State Lottery Commission, I would like to advise that any person may make a video or audio recording of this open meeting. However, I am obligated to inform attendees of any recording at the beginning of the meeting, so I ask that those who are making any recording identify themselves now as doing so.” Judy Moore, Senior Executive Assistant, Lottery, identified herself as recording to assist in the preparation of the meeting minutes. Treasurer Goldberg informed the Commission that Commissioner Anthony Salvidio was unable to be physically present at the meeting. Treasurer Goldberg then made the following statement: “Pursuant to the Massachusetts Open Meeting Law, Massachusetts General Laws, Chapter 30A, section 20, Commissioner Anthony Salvidio will be participating remotely for this meeting because his physical attendance is unreasonably difficult. The Lottery Commission’s by-laws allow for remote participation when a quorum of the members are physically present at the meeting location and a quorum of the Commission is physically present at the meeting location today. Commissioner Salvidio is participating by telephone. Commissioner, if at any time we are not clearly audible to you, please let us know. Commissioner Salvidio may participate in any votes scheduled to take place at today’s meeting. All votes must be taken by roll call.” II. Approval of the Minutes from September 25, 2019 Treasurer Goldberg asked the Commission to accept the minutes from the Massachusetts State Lottery Commission (“Commission”) meeting held on September 25, 2019. Commissioner Andrew Maylor made a motion to accept the minutes of the meeting and Special Counsel Spencer Lord seconded the motion. Treasurer Goldberg, recognizing there was no further discussion, took a roll call vote. Treasurer Goldberg asked the Commission all those in favor: Commissioner Andrew Maylor: yes; Commissioner Anthony Salvidio: yes; Commissioner Meghan Liddy: yes; Special Counsel Spencer Lord: yes; and, Treasurer Goldberg: yes. The motion carried 5-0. The minutes were approved at 10:44 a.m. III. Executive Session Treasurer Goldberg announced that the Commission would be moving into Executive Session. Treasurer Goldberg stated, “pursuant to Massachusetts General Laws, Chapter 30A, 2 Section 21, Purpose 6, I seek a motion for the Commission to enter into Executive Session, to consider the purchase, exchange, lease or value of real property.” Treasurer Goldberg asked the Commission for a motion to enter into Executive Session. Commissioner Maylor made a motion to enter into Executive Session and Commissioner Special Counsel Lord seconded the motion. Treasurer Goldberg took a roll call vote. Special Counsel Spencer Lord: yes; Commissioner Maylor: yes; Commissioner Salvidio: yes; Commissioner Liddy: yes; and Treasurer Goldberg: yes. The motion carried 5-0. The Commission moved into Executive Session at 10:44 a.m. Treasurer Goldberg stated that the Commission would reconvene in open session at the end of the Executive Session. At 11:55 a.m., the Commission reconvened in open session. DCAMM Director, Office of Leasing and State Office Planning, Martha Goldsmith, DCAMM Project Manager Debbie Russell, and Lottery Chief Operating Officer David Falcone left the meeting after the Executive Session. IV. Executive Director’s Report a. Sales Update b. Marketing Update Fiscal Year 2019 – Final Statement of Operations Executive Director Michael Sweeney began the report by reviewing the final statement of operations for Fiscal Year 2019 (“FY19”) and announced that it continues to be a good story. He reported on record setting net profits of $1.104 billion, as well as record profits in revenues, prizes paid to customers and commissions and bonuses earned by retailers. Recent Editorial - Lottery holds up well to new competition, October 11, 2019 Executive Director Sweeney thanked the Commission as well as the team at the Lottery regarding a recent Mass Live editorial. He stated that it’s not often that a publication cites a governmental agency as being one of the most well-run and successful operations in the Commonwealth. He added that it doesn’t happen by accident, it happens with the leadership of the Commission and Treasurer that allows the Lottery to take some operational risks. This has positioned the Lottery to have this type of success during the last five years. Lottery Sales Update Executive Director Sweeney reported that the overall sales for September 2019 were up $7.6 million in comparison to September 2018. He noted that the estimated September 2019 net profit and prize payout figures do not include accruals for prizes won that have not yet been paid. Due in part to a $15 million increase in overall prizes paid ($303 million in September 2019 as compared to $288 million in September 2018), and a combined $3.9 million decrease in Mega Millions and Powerball sales in September 2019 as compared to September 2018, the estimated net profit for September 2019 was $67.9 million as compared to $77.5 million in September 2018, resulting in an estimated $9.6 million decrease in net profit. The estimated prize payout for September 2019 was 75.52 percent, as compared to 72.91 percent in September 2018. Executive Director Sweeney explained that this was very high and beginning to show the full momentum 3 and manifestation of the constant hitting of the Powerball and Mega Millions jackpot, which will negatively affect the profit margin. He stated that in comparison to instant ticket sales, draw games, particularity these two games, are the higher profit games for the Commonwealth as well as for all lotteries. Executive Director Sweeney reported on the figures for Fiscal Year 2020 (“FY20”). He stated that the FY20 year-to-date net profit and prize payout figures both include accruals for prizes won that have not yet been paid. Due in part to a $14.9 million increase in prizes paid in the first three months of FY20, compared to the first three months of FY19 ($957.1 million in FY20 compared to $942.2 million in FY19), and a combined $18.3 million decrease in Mega Millions and Powerball sales (Mega Millions: $14.6 million decrease, Powerball: $3.7 million decrease) in the first three months of FY20, compared to the first three months of FY19 as a result of smaller jackpots, the estimated year-to-date net profit for the first three months of FY20 is $241.9 million compared to $259.7 million for the first three months of FY19. After adding a 1-day average net profit figure of $2.7 million, due to a shift in the calendar that resulted in 1 less day being included in the net profit figure for the first three months of FY20, the adjusted year- over-year change for the first three months of FY20 versus the first three months of FY19 is an estimated $15.1 million decrease in net profit. The estimated year-to-date prize payout for the first three months of FY20 is 73.96 percent, as compared to 72.81 percent for the first three months of FY19. Instant Ticket sales were up $8.0 million, Keno sales were up $3.2 million, Megabucks Doubler sales were up $227,076 (high jackpot of $5.4 million compared to $2.9 million in September 2018), and Mass Cash sales were up $280,152. Compared to September of 2018, Mega Millions sales were down $2.1 million (high jackpot of $227 million compared to $336 million in September 2018), Powerball sales were down $1.8 million (high jackpot of $80 million compared to $213.4 million in September 2018), All or Nothing sales were down $130,588, Numbers Game sales were down $41,766, and Lucky for Life sales were down at $15,644. Five Year Comparison Chart The prize payout percentage was at 73.9 percent through September. Executive Director Sweeney reported that the prize payout as a percentage of sales tells the entire story. Gross Sales Results Discussing both the Gross Sales Results chart, September FY20 versus FY19 Unadjusted Non-Fiscal Year, and the Year to Date FY20 versus FY19, Executive Director Sweeney reported that sales were up 1.9 percent through September, but heavily weighted down by just about $4 million in negative sales through Mega Millions and Powerball.