OAR 177-040-0024: Compensation Rate Study for Video Lottery Retailers

(1) Purpose: The Director of the Oregon State Lottery may conduct a comprehensive Video Lottery retailer compensation study. The compensation study will assist the Lottery Commission in meeting its legal obligation to develop a compensation system that maximizes net revenue to the state for the public purpose and provides a reasonable rate of return for Video Lottery retailers for their sales of Lottery tickets or shares. If a Video Lottery retailer compensation study is conducted, it is to be completed prior to the start of the term of any new Lottery Retailer Contract. (2) Selection of Independent Consulting Company or Consultant: The Video Lottery retailer compensation study shall be completed by an independent economic consulting company or economic consultant chosen by the Director. The Director may select a consulting company or consultant using any procurement process deemed appropriate by the Director, but in selecting the consulting company or consultant, the Director shall determine that the company or consultant has the requisite experience, expertise, and knowledge for this type of study. The Director shall submit a report to the Lottery Commission before entering into any contract for services with the consulting company or consultant selected by the Director. (3) Analysis of Video Lottery Retailer Compensation Systems: The study shall provide an analysis and comparison of various Video Lottery retailer compensation systems, and shall set forth the pros and cons for each system and the estimated costs to Lottery if it were to use each system. The analysis shall include, but is not limited to, the following Video Lottery retailer compensation systems: (a) Tiered System: Tiered compensation rate system where retailer compensation is calculated as a percentage of dollars played, but the percentage declines as dollars played increase over a business year. The higher the dollars played, the lower the percentage paid. This analysis shall include, but is not limited to, the current compensation system described in OAR 177-040-0026 . (b) Single Rate System: Single compensation rate system where the retailer compensation is calculated by applying a single, specified percentage to a retailer’s dollars played over a business year. This analysis shall include a method or methods for determining the single percentage rate. (c) Individualized System: Individualized compensation rate system where compensation is calculated based on a percentage of dollars played as determined individually for each Video Lottery retailer. This analysis shall include the method or methods the Lottery would use to determine the percentage rate or rates for each individual retailer. (4) Lottery Commission Responsibilities To Be Addressed: In analyzing the various compensation rate systems, as required in section (3) of this rule, the study must consider and address the following constitutional and statutory responsibilities of the Lottery Commission and the Lottery Director to: (a) Ensure the fairness, integrity, security, and honesty of the Lottery ( Article XV, section 4, 4(a) , and ORS 461.150 ); (b) Undertake to develop a system to maximize net revenue while providing a reasonable rate of return for contractors ( ORS 461.445 ); (c) Select as Lottery game retailers such persons to best serve the public convenience and promote the sale of Lottery tickets or shares ( ORS 461.300 ); (d) Provide adequate and convenient availability of Video Lottery games in both rural and metropolitan locations to promote sales ( ORS 461.300 ); (e) Determine retailer compensation ( ORS 461.310 ); and (f) Make ongoing study and comparison of the operations of lotteries in other states and countries ( ORS 461.180 ). (5) Other Factors: Notwithstanding section (4) of this rule, the Director shall determine what other factors are necessary for consideration and review in order to complete a comprehensive Video Lottery retailer compensation rate study. (6) Completion: The studies required under this rule are to be completed no later than nine months prior to the start of the term of a new Video Lottery retailer contract.