WSR 98-16-078
PROPOSED RULES
LOTTERY COMMISSION
[Filed August 5, 1998, 8:14 a.m.]
Original Notice.
Preproposal statement of inquiry was filed as WSR 98-12-033.
Title of Rule: Chapters 315-04 and 315-30 WAC, retailer licensing.
Purpose: To provide for credit checks for retailers applying for instant ticket licenses; to revise the provisions regarding retailer credit; to move the retailer credit provision in chapter 315-30 WAC, General rules to chapter 315-04 WAC, Licensing rules; to provide for reporting retailer credit history to credit bureaus.
Statutory Authority for Adoption: RCW 67.70.040.
Statute Being Implemented: RCW 67.70.040.
Summary: See Purpose above.
Reasons Supporting Proposal: See Explanation of Rule below.
Name of Agency Personnel Responsible for Drafting: Mary Jane Ferguson, Rules Coordinator, Olympia, (360) 753-1947; Implementation and Enforcement: Merritt D. Long, Director, Olympia, (360) 753-3330.
Name of Proponent: Washington State Lottery Commission, governmental.
Rule is not necessitated by federal law, federal or state court decision.
Explanation of Rule, its Purpose, and Anticipated Effects: WAC 315-04-095 will provide for credit checks for retailers who apply for instant ticket licenses. Currently, only retailers applying for on-line license endorsements undergo credit checks. The new section will improve the lottery's ability to weigh any risk in providing instant ticket inventory to new retailers. Credit reporting, provided for in the new section WAC 315-04-105, will improve the lottery's ability to require retailers to meet their financial obligations to the lottery. Adding "or cash in lieu of a bond" in WAC 315-04-090 and 315-04-130 will permit retailers to post either cash or a bond when so required by the director.
Proposal Changes the Following Existing Rules: As noted above, the lottery will now require credit checks for applicants for instant ticket licenses, in addition to the current requirement for credit checks for applications for an on-line license endorsement. In addition, the lottery may now report retailers' credit information to credit bureaus. Finally, the addition of "or cash in lieu of a bond" permits more flexibility when the director requires the posting of a bond.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The lottery has considered whether these rules are subject to the Regulatory Fairness Act, chapter 19.85 RCW, and has determined that they are not for the following reasons: (1) The rules have no economic impact on business' cost of equipment, supplies, labor or administrative costs. The rules are designed to establish rules and procedures for the playing of instant lottery games; and (2) the rules will have a negligible impact, if any, on business because they are interpretive. They have been promulgated for the purpose of stating policy, procedure and practice and do not include requirements for forms, fees, appearances or other actions by business.
RCW 34.05.328 does not apply to this rule adoption. Said section does not apply to these proposed rules because they are not proposed by one of the listed agencies. As the rules are merely interpretive, the lottery does not voluntarily apply this section.
Hearing Location: DoubleTree Hotel, Spokane, Washington, on September 18, 1998, at 8:30 a.m.
Assistance for Persons with Disabilities: Contact Mary Jane Ferguson by September 17, 1998, (360) 753-1947.
Submit Written Comments to: Mary Jane Ferguson, Lottery, fax (360) 586-6586, by September 17, 1998.
Date of Intended Adoption: September 18, 1998.
August 4, 1998
Mary Jane Ferguson
Rules Coordinator
OTS-2351.1
AMENDATORY SECTION (Amending Order 116, filed 4/10/89)
WAC 315-30-080 On-line retailer selection criteria. (1) The selection and distribution of on-line retailers throughout the state will be based on:
(a) The number of licensed retailers in each of the regions identified in WAC 315-12-030, and then;
(b) The potential for revenue generation, demographics, and public accessibility within that region.
(2) An on-line license endorsement shall be issued only to a person who possesses a valid general license, provided, the director may issue an on-line endorsement to a lottery retailer who possesses a valid provisional license if that retailer is a new owner of a previously established on-line location.
(3) In addition, the director shall consider the following factors in the selection of on-line retailers.
(a) Business and security considerations which include but
are not limited to: (i) Instant game accounts receivable record,
(ii) criminal history of owners and officers, (iii) history of
criminal activity at the business establishment, (iv) past
security problems, (v) credit rating as defined in WAC ((315-30-090)) 315-04-095, (vi) licensing requirements, and (vii) history
of administrative or regulatory actions.
(b) Marketing considerations which include but are not limited to: (i) Instant ticket sales history, (ii) outside vehicle traffic, (iii) retail customer count, (iv) access to location, and (v) management attitude and willingness to promote lottery products.
(4) The director shall determine the total number of TDM's
to be installed throughout the state and shall establish
procedures for on-line site selection. In determining the order
in which TDMs will be installed within a given geographic
area(([,])), an on-line site selection survey will be completed
in which, the factors considered will include but not be limited
to:
(a) General information;
(b) Description of proposed site;
(c) Proposed TDM location;
(d) Products sold;
(e) Services available;
(f) Store's hours;
(g) Estimated on-line sales;
(h) Instant sales per week;
(i) Nearest four on-line agents' sales per week;
(j) District sales representative's assessment; and
(k) Regional sales manager's assessment.
(5) The director may, after a TDM has been in operation for six months, order the removal of a TDM from a low producing on-line retailer location after considering marketing factors which include but are not limited to:
(a) Sales volume not increasing at state-wide average;
(b) Weekly sales volume below that of similar businesses with similar market potential;
(c) Sales volume below $5,000 per week in metropolitan areas;
(d) Public is adequately served by other on-line agent locations; and
(e) Failure to generate sufficient sales volume to cover the lottery's administrative costs.
(6) The director may immediately discontinue a TDM's operation, order removal of a TDM from an on-line retailer location, or take any other action authorized under WAC 315-04-200 in the event that the on-line agent:
(a) Fails to comply with any rule established by the commission, any instruction issued by the director;
(b) Tampers with or attempts to tamper with the TDM or on-line system;
(c) Fails to make payment of a prize;
(d) Makes payment with a business check and the check is dishonored for any reason; or
(e) Fails to enter into the uniform agreement with the lottery as required in WAC 315-30-075.
[Statutory Authority: RCW 67.70.040. 89-09-009 (Order 116), § 315-30-080, filed 4/10/89; 85-22-057 (Order 81), § 315-30-080, filed 11/5/85; 85-09-004 (Order 72), § 315-30-080, filed 4/5/85; 84-21-013 (Order 66), § 315-30-080, filed 10/5/84; 84-05-008 (Order 51), § 315-30-080, filed 2/7/84.]
NOTES:
Reviser's note: RCW 34.04.058 requires the use of underlining and deletion marks to indicate amendments to existing rules, and deems ineffectual changes not filed by the agency in this manner. The bracketed material in the above section does not appear to conform to the statutory requirement.
REPEALER
The following section of the Washington Administrative Code is repealed:
WAC 315-30-090 On-line retailer credit criteria.
OTS-2350.1
AMENDATORY SECTION (Amending Order 101, filed 5/4/87)
WAC 315-04-090 License issuance eligibility. (1) The director may issue a license to any person to act as a lottery retailer who meets the eligibility criteria established by chapter 7, Laws of 1982 2nd ex. sess., and these rules.
(2) Before issuing a license, the director shall consider:
(a) The financial responsibility and security of the person and its business or activity;
(b) The background and reputation of the applicant in the community for honesty and integrity;
(c) The type of business owned or operated by the applicant to ensure consonance with the dignity of the state, the general welfare of the people and the operation and integrity of the lottery;
(d) The conformance of businesses located in residential areas to local land use and zoning codes, regulations, and ordinances;
(e) The accessibility of the applicant's place of business or activity to the public;
(f) The sufficiency of existing licenses to serve the public convenience;
(g) The volume of expected sales;
(h) The veracity of the information supplied in the application for a lottery retailer license; and
(i) The applicant's indebtedness to the state of Washington, local subdivisions of the state and/or the United States government.
(3) The director may condition the issuance of any license upon the posting of a bond or cash in lieu of a bond in such terms and conditions as the director may require.
(4) The director shall establish procedures to assure that approval of the appropriate local governmental unit is obtained prior to issuance of a license to a business located in a residential area which is a nonconforming use under local land use and zoning codes, regulations, and ordinances.
[Statutory Authority: RCW 67.70.040. 87-10-043 (Order 101), § 315-04-090, filed 5/4/87; 86-01-060 (Order 83), § 315-04-090, filed 12/16/85. Statutory Authority: RCW 67.70.040 and 67.70.050. 83-05-029 (Order 14), § 315-04-090, filed 2/10/83. Statutory Authority: 1982 2nd ex.s. c 7. 82-21-037 (Order 2), § 315-04-090, filed 10/15/82.]
NEW SECTION
WAC 315-04-095 Retailer credit criteria. (1) The director shall deny an instant scratch ticket license or an on-line license endorsement to any applicant whose credit is found to be poor.
(2) The director may grant an instant scratch ticket license or an on-line license endorsement to an applicant whose credit is rated as marginal or minimum as defined in this section. Provided, the director shall require:
(a) Applicants whose credit is rated as marginal as defined in this section to obtain a surety bond or savings certificate under terms and conditions established by the director prior to issuance of the license. Such surety bond must be secured from a company licensed to do business in the state of Washington. The bond or certificate shall be in the amount of seven thousand five hundred dollars unless the director determines a higher amount is required.
(b) Applicants whose credit is rated as minimum as defined in this section to obtain a surety bond or post cash in lieu of a bond under terms and conditions established by the director or submit five letters of credit to the lottery prior to issuance of the on-line license endorsement. Such surety bond must be secured from a company licensed to do business in the state of Washington. The bond or cash shall be in the amount of seven thousand five hundred dollars unless the director determines a higher amount is required, based on sales volume and financial solvency of the retailer.
(3) In the event the retailer's credit is rated as poor or marginal subsequent to the issuance of the license the director may:
(a) Revoke or suspend a retailer's license; and/or
(b) Require such a retailer to secure a surety bond from a company licensed to do business in the state of Washington or post a savings certificate under terms and conditions established by the director. The surety bond or saving certificate shall be in the amount of seven thousand five hundred dollars unless the director determines, based on sales volume and financial solvency of the retailer, a higher amount is required.
(4) Credit rating is defined as the ability to meet financial obligations when they become due. It includes current reporting accounts payable and public financial record information including, but not limited to, court records, other public records and reports from credit bureaus or other credit reporting agencies up to three years prior to the lottery's credit check request. A significant incident shall be defined as public financial record information which includes any lien, judgment, bankruptcy, involuntary collection action or any similar incident which reflects on the individual's willingness and ability to pay creditors. A numerical rating of "one" represents excellent credit. A numerical rating of "nine" represents involuntary collection.
(a) A "poor" credit rating indicates public record showing three or more significant incidents within the past three years.
(b) A "marginal" credit rating indicates public record information showing one or more significant incidents within the past three years.
(c) A "minimum" credit rating indicates the information is insufficient for evaluation.
(d) An "acceptable" credit rating indicates that there have been no significant incidents in the public record within the past three years. Provided, at least three accounts must be evaluated in order to receive an "acceptable" rating.
(5) Credit rating checks shall be conducted as follows:
(a) Corporation business credit ratings shall be checked. Personal credit ratings of the corporate officers and owners of ten percent or more equity in the corporation may also be checked.
(b) Sole proprietors and partnership business credit ratings shall be checked. Personal credit ratings of:
(i) The sole proprietor and his or her spouse; or
(ii) All partners and their spouses shall also be checked.
(c) Findings shall be applied in accordance with subsections (1), (2) and (3) of this section.
[]
NEW SECTION
WAC 315-04-105 Reporting retailer credit history. The lottery may report any part of a retailer's credit information to a credit bureau or agency which is a clearinghouse for information regarding credit history.
[]
AMENDATORY SECTION (Amending Order 83, filed 12/16/85)
WAC 315-04-130 Death or incapacity of licensee. (1) In the event of the proven incapacity, death, receivership, bankruptcy or assignment for benefit of creditors of any lottery retailer, upon approval of the director, the license may be transferred to a court appointed or court confirmed guardian, executor or administrator, receiver, trustee, or assignee for the benefit of creditors, who may continue to operate the activity under the license, subject to the provisions of chapter 7, Laws of 1982 2nd ex. sess. and these rules.
(2) The person to whom a license is transferred hereunder must be otherwise qualified to hold a license.
(3) The license following transfer shall be void upon that person ceasing to hold such a court appointed or court confirmed position.
(4) The director may condition the transfer of any license under this section upon the posting of a bond or cash in lieu of a bond in such terms and conditions as the director may require.
[Statutory Authority: RCW 67.70.040. 86-01-060 (Order 83), § 315-04-130, filed 12/16/85; 85-09-004 (Order 72), § 315-04-130, filed 4/5/85. Statutory Authority: 1982 2nd ex.s. c 7. 82-21-039 (Order 4), § 315-04-130, filed 10/15/82.]