Texas Parks and Wildlife Commission
Finance Committee

May 27, 2009

Commission Hearing Room
Texas Parks & Wildlife Department Headquarters Complex
4200 Smith School Road
Austin, TX 78744

BE IT REMEMBERED, that heretofore on the 27th day of May, 2009, there came to be heard matters under the regulatory authority of the Texas Parks and Wildlife Commission in the Commission Hearing Room of the Texas Parks and Wildlife Department Headquarters Complex, to wit:

APPEARANCES:

THE TEXAS PARKS AND WILDLIFE COMMISSION:

THE TEXAS PARKS AND WILDLIFE DEPARTMENT:

P R O C E E D I N G S

COMMISSIONER HOLT: We will now move on to the Finance Committee. I am chairman of this, for the interim, anyway. The first order of business is the approval of the minutes from the previous committee meeting, which have already been distributed. Is there a motion for approval?

COMMISSIONER MARTIN: So moved.

COMMISSIONER HOLT: So moved by Commissioner Martin.

COMMISSIONER BIVINS: Second.

COMMISSIONER HOLT: Second by Commissioner Bivins. All in favor?

(A chorus of ayes.)

COMMISSIONER HOLT: Any opposed?

(No response.)

COMMISSIONER HOLT: Thank you. Committee Item Number 1, Update on TPWD Progress in Implementing the TPWD Land and Water Resources Conservation and Recreation Plan.

Mr. Smith, please make your presentation.

MR. SMITH: Thank you, Mr. Chairman. Just two items for the Commission that I want to touch on one, building on the success last year of the annual public meeting in Houston, and how well received that was, we planned in August to take the annual public hearing to Fort Worth. Commissioner Duggins has been very helpful in working with us to find a suitable venue on that front. And so I just wanted to let you know, we have made that decision and we will be in Fort Worth in August for that meeting.

The second thing I want to just mention is the budget process for the next fiscal year. We are still waiting on the Legislature to approve the biennial budget for fiscal year '10 and '11. We expect it to go to the floor sometime later this week, and for us to know definitively what our appropriation will be over the biennium. I want to point out that Gene McCarty in particular has just been absolutely indispensable, in working with the Legislature through this process literally on a daily basis working on those issues, and just representing the Department very well. And so I want to acknowledge Gene in front of this group.

Another important element of the appropriations process, is the Supplemental Appropriation Bill for this fiscal year. That is designed to aid agencies, and universities and other public entities that have been impacted by Hurricane Ike and recovery and rebuilding costs. The Agency expects to get some funding as part of that process as well, to help with our rebuilding of certain Wildlife Management Areas on the coast, that we have talked about in the past, and our State Parks. So hopefully, we will make it through the end of this week in good order. So far so good.

We have had a very good working relationship with the Legislature this session. And so we have got all appendages crossed that it will conclude as such at the end of this week. So with that, I will conclude my remarks. Thank you, Mr. Chairman.

COMMISSIONER HOLT: Thank you, sir. Committee Item Number 2, Financial Overview. Mr. Gene McCarty, please make your presentation. Gene.

MR. MCCARTY: Mr. Chairman, Commissioners, for the record, my name is Gene McCarty. I am Deputy Executive Director for Administration, and acting Chief Financial Officer.

COMMISSIONER HOLT: That is going to change here, pretty quick.

MR. MCCARTY: Barring any unforeseen catastrophes.

MR. SMITH: Stay healthy, Mike.

MR. MCCARTY: This will probably be the last time I will be in front of you in this capacity for some time to come.

COMMISSIONER HOLT: Fair enough. I am glad you found a good man.

MR. MCCARTY: Today, I want to give you the financial overview for this Commission meeting, which is basically, going to do a review of revenue and budget status, as of March 31, 2009. Let's start off with State Park receipts. As of March 31, we were down .4 percent or $69,921. When you put this in perspective with the loss of Sea Rim and Galveston Island State Park and you remove those from the prior year data, we are actually up 2.7 percent, which is a little bit below where we were this time last, two months ago when I reported. We were actually around 4 percent. So we dropped a little bit over time. But it is well above our revenue forecast and what we are currently using for Rider 27, and our revenue above the biennial revenue estimate.

COMMISSIONER HOLT: Speaking of Galveston State, because we are going into the summer season, what kind of condition is it going to be for the summer? I mean is it usable at all, or do we have anything? Any dollars that can be brought in? I guess Sea Rim too, but I know Sea Rim is not going to go back to the full park it was. In Galveston, we are trying to get back there.

MR. DABNEY: Chairman, Commissioners, Walt Dabney, State Parks Director. Sea Rim is, we are just cleaning Sea Rim up. We are going to have basic day-use facilities there, boat ramp and that kind of thing. And so not much is going to be put back at Sea Rim anytime soon.

Galveston, on the other hand, has been an incredible partnership with volunteers down there, the Friends group, Friends of Galveston Island State Park have really put their money where their mouth is, and stepped up. The only building that was really serviceable, they have gone in and gutted, and completely rehabbed it themselves, and it is usable; the old nature center down there. We have nothing left on the beach side, other than what we have cleaned up, but back on the bay side, they are going to have 15, 18 campsites that are ready to open here in June.

And so we will not only be open, we will be packed, with the available facilities that we have. We have got a couple of the bathrooms that were brand new, the new CXTs that we had out there. We lost four of them outright; two of them are going to be serviceable. And we will use those on an interim basis for beach support, for people to use the beach. There just won't be camping on the beach. So we are going to have a basic functioning Galveston Island State Park because of this great partnership with the locals there, here very soon.

COMMISSIONER HOLT: Okay.

MR. SMITH: If I could just add to what Walt has said, one of Walt's Regional Directors, Justin Rhodes, who was presented in front of this Commission one time, you know we have been going through a lot of work to try to secure appropriations to rebuild Galveston Island State Park. And when Justin heard that it was going to take four to five years to get Galveston Island State Park reopened, he said, how about June. And so in working in concert with the volunteers, they have done a phenomenal job to at least get that partially on line. And the staff deserves a lot of credit, working with the volunteers. It is very, very inspirational.

COMMISSIONER HOLT: Good. Thank you.

MR. DABNEY: Yes, sir.

COMMISSIONER HOLT: I would just remind everybody, that was one of our most visited parks. And so obviously, congratulations. It made them keep these numbers where they are.

MR. MCCARTY: Moving on to boat revenue, as of March 31, we are currently down 7.8 percent or $657,000. Put that in perspective, when we started this in January of '09, we were down 12 percent. February, we were down 9.6. March, 7.8. And if you look at the April data, which we didn't have available at the time to prepare the presentation, but I have available now, we are going to be 6.8 percent down. So we are improving over time. I don't think we will be able to make all of it up, but we are going to be a lot better than where we started after the hurricane.

COMMISSIONER HOLT: Good.

MR. MCCARTY: License sales revenue, this is for hunting and fishing licenses, and commercial fishing licenses. We are currently down 2.9 percent or $2.2 million total. When you look at this in comparison to where we started, at about 12 percent down, after the hurricane, we have come a long way, and we are expecting to continue to make up a little bit of ground, certainly through the late spring/early summer. We are hoping to even make up more ground. And if you look at that same April data, we are down to 2.6 percent, as opposed to 2.9. So we continue to make up a little ground you know, every month as we go through the fishing season.

COMMISSIONER HOLT: Remind everybody, we have six months left, coming after, I mean after this.

MR. MCCARTY: Yes, sir.

COMMISSIONER HOLT: Two more quarters, essentially.

MR. MCCARTY: Well, we ‑‑

COMMISSIONER HOLT: Does it go to September?

MR. MCCARTY: We have through September, through August 15.

COMMISSIONER HOLT: Yes. That is what I meant. So you have two quarters left.

MR. MCCARTY: Yes, sir.

COMMISSIONER HOLT: Because this ends March 31.

MR. MCCARTY: Yes, sir.

COMMISSIONER HOLT: On this one, you may have a shot at catching up here.

MR. MCCARTY: I think most of our sales will probably pretty well dwindle by June.

COMMISSIONER HOLT: That is why, you fall off, and then it doesn't pick back up until the hunting season, which really is September on, kind of.

MR. MCCARTY: Yes. That is right. Then we will pick up August 15, and that big glut is through the first of November.

COMMISSIONER HOLT: Oh, Labor Day. That is right.

MR. MCCARTY: When you look at total licenses, you know, we are down .5 percent. Hunting was up .7. Total fishing at this point is down 5 percent and combo was down .3. So you can see where the biggest impact is. And that is in fishing. And that is still directly related to the impacts of the hurricane. Because right after the hurricane, we went, in fishing, we had been down as much as 22 percent at one time.

COMMISSIONER HOLT: So more hurricane than recession?

MR. MCCARTY: I think the recession has slowed our recovery.

COMMISSIONER HOLT: Yes.

MR. MCCARTY: When you look at this year, as compared to prior hurricane years, Rita, Katrina, it was tracking along real well until we hit November, the recession time. And as that kicked in, it really kind of slowed our recovery. We were hoping to recover back into the 1 percent range, which is where, what we did in the Rita and Katrina years.

When we look at revenue collections versus annual revenue estimates, by fund, you know, game fish and water safety account, which is our Fund 9, we have collected about 78 percent of our revenue, with about 58 percent of the year has elapsed.

So where we ordinarily would be at about 82 to 85 percent at this particular point in time in terms of total collections. With our State Park fund, our Fund 64, we are at 58 percent with 58 percent of the year elapsed. Our Local Park Fund at 47 percent and our other at 95. The other is driven by an early donation. Other is donation appropriated receipts, and it was driven by an early donation to the shrimp license buy-back account.

COMMISSIONER HOLT: I see. Local Park Fund, do you want to explain that one, how it works.

MR. MCCARTY: The Local Park Fund kind of tracks, it gets, I guess it is a monthly receipt from GR, which is a transfer. So it usually tracks a little behind. And then you get a big slug at the end.

COMMISSIONER HOLT: Yes. Just to help the other Commissioners understand, that one, you should be at 100 percent by the end, shouldn't it?

MR. MCCARTY: Yes, sir.

COMMISSIONER HOLT: Yes.

MR. MCCARTY: Then you get, you look at the summary of the budget adjustments. Since January 1, we have had budget adjustments of $7.4 million. The biggest portion of that is in Rider 27 funds. Rider 27, just to remind you, allows us to appropriate, or appropriates and allows us to budget revenue in excess of the biennial revenue estimate. And we did our finding of fact back in February and received authority to expend additional funds, all in Fund 64. And we budgeted those funds to state parks.

COMMISSIONER HOLT: You might explain where some of those dollars come from, that the Department earns in different ways.

MR. MCCARTY: In this particular case, in Rider 27, it was mostly oil and gas revenues on state parks as the basic component of those funds that are in excess of the biennial revenue estimates. The biennial revenue estimate tracks fairly well with gate receipts, but they haven't caught up with our increased revenues in oil and gas.

COMMISSIONER HOLT: As a reminder, Rider 27 to be reauthorized hopefully in a few days ‑‑

MR. MCCARTY: We do have Rider 27. It is more directly related. Rider 27, if it is approved through the budget in the next couple of days is more directly related to Fund 9 fees and also a little bit into Fund 64. But it is mostly regged into Fund 9 fees this go-round. But it does give us authority to appropriate any additional revenue above the biennial revenue estimate.

COMMISSIONER HOLT: Including oil and gas revenue, anything we are getting.

MR. MCCARTY: Including oil and gas. Yes, sir.

COMMISSIONER HOLT: Yes. Okay.

MR. MCCARTY: When we look at budget versus expenditures, you can see, we have about 42 percent of the year remaining. And with salaries and the other budget category, we have 43.9 percent remaining. In the operating we have got 48 percent. In grants, we have got 52 percent. If you remember, we do grants twice a year, once in January and one large grant in August. So we will spend the remaining 52 percent in our August grant period. And capital projects, as we know, we often have, it takes a while to get those capital projects under way, and then benefits at 47 percent. And with that, I will answer any questions.

COMMISSIONER HOLT: Any questions or comments? It is straightforward. No further action is required.

Committee Item Number 3, Proposed License and Boat Registration Fee Increases, recommended adoption of proposed changes. It means, Gene, you are up again.

MR. MCCARTY: For the record, I am Gene McCarty, Deputy Executive Director for Administration. The item before you today is the proposed increases in hunting and fishing licenses and boat registration fees.

Just to go back and recap the presentation that I made at the last Commission meeting, if you will remember, we have not increased fees in the Agency for hunting and fishing and boat registration and titling since 2004.

Prior to 2004, we hadn't increased fees since 1996. I think this gives you an idea that we don't, we just, there is a pretty good period of time between fee increases. We don't just come back every year and ask for more money. Our fee increases are very deliberate. And we are very conscious of the impact of fee increases on our constituents.

You know, since that 2004, something to take into consideration for this particular fee increase, since that 2004 fee increase that we put into effect, since that time, we have had about a 6.1 percent increase in costs. And those are direct costs associated with operating whether it be fuels, whether it be utilities or just the general operating costs of operating the fish and wildlife resource component of the Agency. This particular fee increase as proposed is a 5 percent rolled up to the next highest dollars.

As you may remember, we began the discussions of this fee increases over a year ago. Dr. Larry McKinney was sitting in this seat at that particular time, and when we were talking about our needs, the overall need to do a fee increase, the overall impact of inflation, the impact of increased costs, the impacts of turnover, the need for recruitment and retention funds, we started talking about this some time ago. And at that time, we were talking about a much larger fee increase of 15 percent or greater fee increase. And sensitive to the issues and concerns out there, and the change in the economy, we have really scaled it back to just what we absolutely need to get by. And that is this 5 percent rolled up to the next highest dollars.

This really is going to equate to an approximate $2 to $5 increase per license for most of our most popular licenses out there. Obviously, there is going to be some that are more. Many of our commercial licenses are fairly expensive licenses, and a 5 percent on one of those commercial licenses could be 15, $20 or more. So there are a few, and I will go over what some of those outliers are. But for the most part, most of our most popular recreational licenses, the increase is going to be from $2 to $5. This is expected to generate approximately $3.5 million. When we came and talked about it before, it was a little bit more. We have done some evaluations. There are a number of licenses that we removed from this proposal. They are mostly commercial licenses. They are licenses that have been impacted over the last year by some regulatory changes, such as just an example, when we put a catch quota on the Menhaden Fishery, we chose not to increase the Menhaden boat license. In actuality, that is our most expensive license that we have out there. It is a $4,000 license. And because we put a quota on the catch quota, we chose not to increase that license. So we have removed a few licenses from the time when we talked about it. But it is mostly in that context.

Just to give you an idea of what the average license increase is going to look like on our most popular licenses, the super combo package would go from $64 to $68. That is a $4 increase. Our resident hunting license would go from $23 to $25. That is a $2 increase. Our resident freshwater fishing license would go to $28 to $30. Again, a $2 increase. And our resident saltwater license would go from $33 to $35, again a $2 increase.

Some of those exceptions that I was talking about is the lifetime hunting licenses. The resident hunting or fishing license would go from $600 to $1,000. The resident combo would go from $1,000 to $1,800. We haven't increased this license or addressed this lifetime license since 1997. And over time the actuarials on this have eroded significantly. We really wanted to be looking at a 20- to 25-year payout on this. We had gotten down to the point where a payout on it was around 15 years, 14 or 15 years. So with this increase, the actuarials would go back up to about 26 years. The resident shrimp boat captain's license, this is just an example of a commercial license, would go from $30 to $50. One of the reasons for this significant increase above a 5 percent is we are trying to recapture some dollars or some revenue that we lost when we did a rule change that didn't require all the people on board a resident shrimp boat to have a general commercial fishermen's license.

And then again, there is various resident and nonresident commercial license which would be a 5 percent increase, but it would be, that 5 percent increase will be above the $2 to $5 that we are talking about, just because they are more expensive licenses.

Let's go into boat registration and titling fees. Boat registration fees again were last changed in 2004. Just a reminder, the boat registration fees cover your boat for a two-year period. And this cost increase would be used for improvements and update our boat registration and titling system, which is an electronic, fully integrated electronic system, the boat theft enforcement, boating fuel costs for game wardens and boating safety and BW ‑‑ enforcements. The proposed increase would be a 5 percent rolled up to the next highest dollar, with two exceptions. The additional revenue resulting from the boat registration fee is expected to be about $1.6 million per year.

This again, gives you kind of an idea as to what the increase would be. And again, these are for two years. So if you have got a vessel that is between 16 and 26 foot in length, you are currently paying $50, you would go to $53. That's for a two-year registration period.

The exceptions that we had, is we are trying to build in some ‑‑ I guess, some differentiation between sizes, and trying to get the fee a little bit more commensurate with the value of the vessel. And so we are bumping those vessels from 26 to 40 feet up more than the 5 percent. They are currently 70; they'd go to 110. And those vessels that are in excess of 40 feet are currently 90, and they would go to 150.

This 150 is a change from what we originally proposed. We originally proposed 200. This is one of the areas where we got a good deal of feedback through the public hearing process. And we went back in and looked at some comparisons to other states and did a little bit more, just looked at it a little bit in terms of fairness and equity and I think it is appropriate to back that back down to $150. So that would be one, that would be an amendment to our proposal that I would make. You know, registration, transfers and duplication fees go from ten to eleven and titles actually go from 25 to 27. And we are still significantly cheaper than TxDOT on boat titles. Some new revenue opportunities that we have looked at, the implementation of an administrative fee for the reinstatement of licenses that have been revoked, at $100. DPS currently charges $125 for reinstatement of a driver's license if it has been revoked. If we have got a revoked fishing or hunting or commercial license, we would like to do an implementation of an administrative fee of $100.

Reinstatement of the non-resident commercial fishing boat license at $100. We had inadvertently removed the non-resident commercial fishing boat license from our license catalog two years ago, and then as we went through the process, we realized that we are statutorily required to have that license. And so we would like to reinstate it. It was a $70 license. We would like to reinstate it at $100.

And then the annual lifetime license drawing. If you will remember last time, Lydia talked to you a little bit about this program. This is going to be a really interesting kind of a lottery program for a drawing. You can enter and buy an opportunity at $5. These are going to go on sale on August 15. Then we will have a drawing, and give away a lifetime license. And hopefully, this will help generate some additional revenue.

Action since the last Commission meeting, we presented the proposal at the March Commission meeting. We published these proposed changes in the Texas Register on April 24. We solicited public feedback via public hearings, our web, the U.S. Mail and the phones. Our public hearings, we conducted 19 public hearings across the state, and you can see where they are, in Abilene, Dallas, Houston, El Paso, Amarillo, Alpine, Hebronville, Lubbock, Midland, Wichita Falls, Tyler, Lufkin, Beaumont, Waco, Bay City, Brownsville, Laredo, San Antonio, Ozona and Corpus Christi. Remember that we had 19 public hearings. That is important in that we received 388 public comments, 16 of which came from the public hearings.

COMMISSIONER HOLT: How many?

MR. MCCARTY: Sixteen.

COMMISSIONER HOLT: Sixteen.

MR. MCCARTY: So we had less than one public comment per public hearing that we conducted. All right. So the vast majority of the public comments came from either the web or the phone, or by mail.

As you can see here, on the recreational fishing license increase, we have got 50 in support and 140 in opposition. The commercial is 24 in support and 15 in opposition. Boat registration and titling is 15 in support and 24 in opposition. Lifetime license is ten in support and 36 in opposition.

Let me kind of give you some of the justification in terms of the recreational license. Probably one-third of the people who were commenting basically said it is just bad economic times. It is just the wrong time to do a fee increase. About one-third said that Texas Parks and Wildlife should do more to economize and eliminate waste. And about one-third is sprinkled among a number of different things that include land owners should pay more, seniors shouldn't have to pay, there shouldn't be a senior increase. All the increases should apply to non-residents. So that is kind of a smattering of what the public hearing was about.

For commercials, again, about one-third said it was just bad economic times. For boat registration and titling the vast majority of the comment was about the larger boats, and larger boats being too much, too much of an increase from 70 to 110, or from 90 to 200.

COMMISSIONER HOLT: Yes. But it is every two years.

MR. MCCARTY: Every two years. Yes, sir.

Public comments on some of our miscellaneous fees, the lifetime license drawing, we got 31 in support and five in opposition. The oppositions were mostly, they wanted available to non-residents, but statutorily, we do not, we cannot give a lifetime license to a non-resident.

COMMISSIONER HOLT: Yes.

MR. MCCARTY: And they didn't like the idea that it is transferable. And the way that we did that is, that if you win it, you can actually give it to your son or your daughter or to someone else. And they didn't like that. There was a couple of comments in opposition.

COMMISSIONER HOLT: But beyond that, it is not transferable. Once you put it in somebody's name ‑‑

MR. MCCARTY: That is correct. That is right. If you are the winner of the drawing, you have a one-time transfer to someone.

COMMISSIONER HOLT: Yes. Right. Okay.

MR. MCCARTY: And the license reinstatement, comments are not really applicable because we do reinstate. But most people who were commenting said that outlaws shouldn't have their license reinstated period. So that is the biggest part of the opposition to that. So this is the motion you will hear, you will see in front of you tomorrow, if you choose to move this item forward to tomorrow's public hearing for public comment and other discussion among the Commission. As you see, it says, adopts amendments as amended, and the amended component of that is the movement from a $200 license for a vessel over 40 to $150. And with that, I will take any questions on this item.

COMMISSIONER HOLT: Any questions? Commissioners?

Commissioner Duggins.

COMMISSIONER DUGGINS: What is an all water fishing, a non-resident one-day all-water fishing license? What privileges go with that?

MR. MCCARTY: If you are capable of doing it, you can fish in saltwater and freshwater in the same day. So an all water license allows you to fish both with both the privileges of a freshwater fishing stamp and a saltwater fishing stamp.

COMMISSIONER DUGGINS: We are only proposing a $1 increase to that. It seems to me that is low for that privilege.

MR. MCCARTY: That is a one-day license, which is really just a $10 license.

COMMISSIONER DUGGINS: What do you mean it is really just a $10.

MR. MCCARTY: It is a $10 license with the stamps added to it. So you have got the license base, and then you have got your added ‑‑

COMMISSIONER DUGGINS: But I am saying that both the one-day license which you propose to move from $10 to $11 ‑‑

MR. MCCARTY: Yes, sir.

COMMISSIONER DUGGINS: And the all water, which is 15 to 16, it seems to me that is almost a meaningless increase.

MR. MCCARTY: One thing to remember through this process, we did not apply the fee increase to any of the stamps. And the reason we didn't do that is because the stamps are generating adequate revenue, and we have fund balances on all of our protected stamp accounts. So you are really just looking at the base license. But yes, it is a very small increase. I would admit that.

COMMISSIONER DUGGINS: You did have some comments that said the non-resident fees were disproportionately low, as I understood you. Maybe that is ‑‑

MR. MCCARTY: Well, yes. Individuals do believe that non-residents should pay significantly more than they do. When we look at our non-resident fees as compared to other non-resident fees in other states, we are fairly comparable. There has always been this idea that we should be ‑‑ you know, we should charge more than what we are charging for non-residents. But we are pretty close to being comparable with other states.

COMMISSIONER DUGGINS: Let me ask you about a couple of others. What is the exotic species no inspection permit?

MR. MCCARTY: I might have to get someone from Wildlife to get up here and talk about that one. That is a public fisheries, isn't it?

(Simultaneous discussion.)

MR. SMITH: Exotic species no inspection permit.

COMMISSIONER HOLT: Wait a minute. Our colonel. Do you not have a colonel from law enforcement?

COMMISSIONER HOLT: Commissioner Duggins, you are finding out that when you are in a bureaucracy, this is what happens sometimes. Over the years, it just starts building. State agencies can be tough sometimes.

MR. MCCARTY: It is the exotic species inspection ‑‑

COMMISSIONER DUGGINS: No inspection.

(Simultaneous discussion.)

COMMISSIONER MARTIN: To be determined.

SPEAKER: I will find out what that is and get back with you.

COMMISSIONER DUGGINS: And our party boat license goes from, is proposed to go from 50 to 53?

MR. MCCARTY: Yes, sir. That is a 5 percent roll up.

COMMISSIONER HOLT: And I understand your issues on some of these. Remember, we are trying to be really sensitive to the time frames that we are in. And you know, hopefully going into the future, we will look at these. And I know Gene's point about you don't want to come back every year, and we don't. But I think we have got to be more cognizant of trying to pick and choose times. And maybe you don't do across the board. In other words, you pick certain, the commercial side one year, and the next year it is recreational I don't know how to do all of this. But this is one of the things we had better discuss in the next few months.

MR. MCCARTY: The party boat license is not what you may think it is, either. The party boat license is not for a party boat fishing license. The party boat license is actually a license that we got through the last legislative session in which these vessels that are basically for lease on lakes and they take large groups of people out on the lake to do whatever they do, recreate, have fun, swim, so forth and so on. There was a great deal of concern about the safety of the operation of those vessels. So last session, they created a license in which, for that license, law enforcement goes out and inspects the vessels, and they have to have an individual who is certified to operate the vessel. So it is not a recreational fishing license or boat license like that. It is more of an outdoor recreation license.

COMMISSIONER HOLT: Yes.

COMMISSIONER DUGGINS: Well, you said that our ‑‑ you thought that our fees were comparable to other states.

MR. MCCARTY: Yes, sir.

COMMISSIONER DUGGINS: I mean, I would say, I think at least as to non-resident hunting, Arizona is substantially higher than our non-resident hunting, because I buy one every year, for purposes of getting an elk point.

MR. MCCARTY: Okay.

COMMISSIONER DUGGINS: I think it is $30 to $50 higher than this. That is just one state. But I mean, apropos to your comment, when we look at this, I think we ought to look around. We do have the greatest resources in the country here. And I think we, at least it seems to me we are a bit low on some of the non-resident and commercial tags here.

MR. MCCARTY: Okay. We can certainly take a look at that. You know, we made a significant increase in 2004, when we made that increase. We made a fairly significant increase in the non-resident hunting and the non-resident fishing. Those were two that were increased probably more than any of the others. But we can look at it again. Yes, sir.

COMMISSIONER HOLT: We are trying to walk a fine line on that one, Commissioner Duggins, relative to recreation and trying to bring people into the state. You know, it is another one of, from a marketing tool point of view, trying to stay priced at a level that will bring them in, and hopefully hunters and fishermen will come in, as you said, to some of the greatest resources in the country, both the fishing and hunting. And then they spend those other dollars, too. So you know, there are those multiplier effects.

COMMISSIONER DUGGINS: Right.

MR. MCCARTY: And in reference to the one-day license, the one-day license has been a real issue for us. It is ‑‑ we try to keep the price of that license down very low because it is an entry point. We are trying to get people to come in and experience hunting and fishing or at least in this case, fishing at a fairly low cost, and hopefully upgrade them from a one-day license to an annual license. If they like the experience. So we are trying to make sure that license stays at a relatively low price point.

COMMISSIONER FRIEDKIN: We had fewer non-residents in '09 versus '08. Correct?

MR. MCCARTY: The first time we had a drop in this year, in non-residents. You have to attribute that to the cost of fuel at the time.

COMMISSIONER HOLT: Yes. Recession too.

MR. MCCARTY: Sure.

COMMISSIONER HOLT: Any other questions or comments for Gene?

(No response.)

COMMISSIONER HOLT: Okay. Gene, thank you. Let me see. I will place this item on the Thursday Commission meeting agenda for public comment and action. Thank you, Gene.

MR. MCCARTY: Thank you.

COMMISSIONER HOLT: Committee Item Number 4, Advisory Committee's Permission to Publish Proposed Rules in the Texas Register. Mr. Scott Boruff.

MR. BORUFF: Chairman and Commissioners, for the record I am Scott Boruff, Deputy Executive Director of Operations. I am here today to request permission to publish in the Texas Register for public comment a proposed rule to extend the duration of our Agency's Advisory Committees for one year. As you can see on the slide, the Parks and Wildlife Code authorizes the Chairman of the Commission to appoint these Advisory Committees. There are ‑‑ the Advisory Committee requirements include they must have rules, there is an annual evaluation of the committees, the committees select their own officers unless otherwise directed by statute, membership is limited to 24 folks, and generally, these committees are for a four-year life.

Back in 2005, these new committees were established, incoming Chairman Holt then undertook with assistance from the staff to put these committees together. We were running a little bit behind, because of the newness and the revamping of the Advisory Committee system, so some of those committees didn't get populated early on in that process. So we are here today to simply ask for the Commission to allow us to go out for public comment to extend these committees for one year. And then we would go back, go back into the normal four-year cycle. I will be glad to answer any questions.

COMMISSIONER HOLT: Yes, sir.

COMMISSIONER DUGGINS: Why wouldn't we go for a longer period than four years?

COMMISSIONER HOLT: Well, remember, the four years is kind of up for a lot of them. And so we will go one more year, and ask them to stay, and then revisit. And so, I just wanted one more year.

COMMISSIONER DUGGINS: You are asking for one.

COMMISSIONER HOLT: This is driven by me pretty much, yes. If everybody is okay with it. And then we also want to look at them. Scott helped. He and I sat down four years ago, it is hard to believe it was four years ago.

Was that four years?

MR. BORUFF: Yes, sir.

COMMISSIONER HOLT: And consolidated some of the Advisory Committees and did some other things to try to streamline that whole process. And I would like to do a little more of that too, as we go into the next four-year round. And I didn't want to try to rush it between now and September. So if you all don't mind.

MR. BORUFF: I will pop these next two slides up, just for information. You can kind of see the suite of Advisory Committees that we are talking about. We generally in most divisions have one Advisory Committee with kind of umbrella authority, for all of the issues that come before that particular division.

The two exceptions are State Parks has four different committees. You can see them on the slide. I would be glad to address any of those. Wildlife Division wins the lottery here. They have got the most Advisory Committees; six different advisory committees there. And there is the recommendation that we go forward.

COMMISSIONER HOLT: Any other questions of Scott?

(No response.)

COMMISSIONER HOLT: Great, Scott. Thank you. Let's see what we can do here. If there are no further questions or discussion, I will authorize staff to publish this item in the Texas Register for the required public comment period. Thanks.

Committee Item Number 5, Internal Audit Report. Concluded and Ongoing Internal Audit Activities and Reports. Mr. Carlos Contreras. Please, Carlos.

MR. CONTRERAS: Good afternoon, Commissioners, Chairman and Mr. Smith. For the record, my name is Carlos Contreras. I am the Director of Internal Audit. As you know, since our last meeting in March, we have distributed three rounds of state park audits. And we have some very encouraging results from those. In round 4, we went to five of the parks, and we found that all of them were compliant with the revenue and visitation plans.

The testing period for the round of audits was in December of 2008. And it was about 14 months after the fiscal control visitation procedures were developed and initiated.

In Round 5, we went to nine of ten parks. We went to ten parks, and nine of the ten were compliant. Again, we found vast improvement in some of the previous rounds, and the testing period for this round of audits was in January, or about 15 months after the fiscal control visitation procedures were implemented. Within Round 5 we also found some other encouraging information. We only had one park that needed to strengthen the internal control processes, related to material errors. And we found that all of the parks from this round collected and reported visitation data. And like I said, nine of the parks were compliant and the other park was least severe.

Again, in Round 6, we went to ten parks. Again, nine of those parks were compliant. And the testing period was in February or about 16 months after the visitation procedures were initiated. Again, encouraging information, we had one park that needed to strengthen their internal control processes, and one park needed improvement in visitation and collection and reporting processes. But we found no material errors. So again, the park that exhibited the findings was in the least severe category. Now through Round 6 of fiscal year '09, I wanted to provide this information on the compliance rate. And this goes back to when we started initiating these audits that were the result of that State Auditor's report.

Through Round 6, we have had 60 of the 81 parks, 74 percent were compliant at least once. And as you know, we have the parks stratified according to risk. And risk is a function of the revenue that is collected at the park, and the visitation numbers. So the high risk parks that we have out there, 14 of 17, 82 percent were compliant. Under the moderate risk, you can see 27 of 35, or about 77 percent were compliant. And the low risk ones are the ones that have the lowest compliance rate of 65 percent. And to give a little context to this slide, the workshop and training for the fiscal control and review and visitation plan, those sessions were initiated in August and September of 2007. And our first foray into doing some of the field work out at the parks was in November of 2007. So this process has been going on from that point. And our first report date actually was in April of 2008.

Now as far as state parks audits, this is what we have planned for the rest of this fiscal year; Round 7, it is in a final, actually, quality assurance phase. You should see the report the first week in June. For Round 8, we currently have scheduled eleven parks, and all of the parks that we are going to go see haven't been compliant yet. So we are going to take a look at that. And finally, for Round 9, we are going to talk to Mr. Boruff and Mr. Dabney about the possibility of going back to some of the parks that were compliant early on in the process, in order to see if they have maintained that status quo and are still compliant with their ‑‑ but we are going to get together with them and see, get some direction and guidance from them on that.

In the 2009 Audit Plan we also had a number of leased concession audits that we had planned. We did 12 of them. Four of them were reported in the March meeting, and we had eight audits that we reported in April. You can see some of the leased concessions and the parks where they were located. It is interesting to note that the scope of our work here was in ‑‑ not in evaluating the efficiency and economies within the concession program itself, but taking a look at the contract requirements that are with each of the lease concessionaires and the Agency in order to measure the compliance with those contract requirements.

And what we are planning to do here in the future is to go and do a follow-up of the concession program that will involve us following up on previous recommendations that were made, and an internal audit report that was from 2003. The SAO report that came out in 2007, and the 12 leased concession audits that we performed this year.

Another audit that we had was the sand and gravel audit, again with an issue date of April of 2009. We had three large points, issues that came out of that audit. The first being that the permit holders would need to comply with permit requirements and the Agency rules. One of the things we also found out was that there was inadequate source documentation, and inadequate record keeping on the part of the permit holders that we examined, which caused some problems initially, but we were able to work through that.

The Agency itself needs to further define their processes to ensure adequate payment oversight. And this is for them to go out and actually, for the Agency to go out and examine the source documentation to ensure that the payments that are sent in by the permit holders are reconciled to their source documentation and that we are getting, that the Department is getting their fair share of the revenue.

And finally, we took a look at some of the sand and gravel rules and processes. And we made some suggestions for strengthening those rules. There weren't any teeth, per se, in the rules, as far as dealing with late payments, things of that nature. So we made some specific suggestions within the audit report.

The second audit that we did was cash handling at the law enforcement offices. We went out to 12 of the 28 law enforcement offices. Law enforcement collects about $60 million a year. So we knew that that was something that we wanted to look at, and that the Agency has done these type of audits on a continuing basis over the years. We found that cash and petty cash controls, they need some improvement to ensure that there was adequate safeguarding of the money and the assets. There was also some processing controls that needed improvement for the boat registration and titling transactions.

Now, that said, our examination of the criteria that is used by law enforcement which is their general orders, we found those to be sufficient. A lot of the problems had to do with the processing of the paperwork. And I can't speak for the causes, but you know, I think that training and proper ‑‑ I guess, more oversight would have helped with some of this. And there is other extenuating circumstances too like turnover in some of these offices, things of that nature.

Our current audit assignments, we are performing a key performance measure, AU for 2008, which involves 20, the 20 key performance measures that we have within the Agency and the way report them to the LBB. We are also conducting an asset management audit, from the field work phase. And what we are doing is taking a look at the asset management process from the receipt of an asset, to the final disposition, and get token samples from each of the divisions. And we are going out to each of the divisions, including some of the field offices, to review those assets.

And finally, as I had mentioned previously, we have the concession program follow-up that we are currently working.

Finally, we have an advisory service assignment. And this is still in the planning process. We had a business continuity planning audit that was originally set up but, we received some direction from executive management that they would like to see the business continuity plan updated to include contact information and make sure that that is all updated. And that was due to the situation with the swine flu. And since that information is contained in the business continuity plan, our proposal was to conduct an advisory service, and work with IT and the various agency divisions to revise the plan and to get it all up to date.

We did find that the plan, the last plan, was from December of 2007 and that the guide, the BCT guidebook that was internal to the Agency was last revised in 2005. So rather than conduct an audit, we already know what the situation is, I think it would be of more value for us to conduct that advisory service and liaison with the divisions, to make sure that the plan is updated. And with that, that concludes my remarks. And I am open for questions.

COMMISSIONER HOLT: Explain the business continuity plan vis-a-vis the swine flu. I am sorry. I got lost on that one. Can you explain that to me? I am sorry. I am not aware of business continuity plan issues relative to swine flu. I guess explain that first.

MR. CONTRERAS: Well, the business continuity plan ‑‑

COMMISSIONER HOLT: I assume it is what it says.

MR. CONTRERAS: Okay. The business continuity plan is a management responsibility to identify those systems, resources, as far as individuals and equipment, those type of things to continue in case that there is a natural or a manmade disaster.

COMMISSIONER HOLT: Okay.

MR. CONTRERAS: Okay. Separate from that is the disaster recovery plan. And that is solely something for IBM and TFT.

COMMISSIONER HOLT: Right.

MR. CONTRERAS: But we have to, as an Agency, define the processes, the systems that we need to be covered and things of that nature, and keep that current. Because if we do have a disaster, that information will be used by IBM to restore those systems that we need. But it is more than just identifying those systems. It is identifying key personnel, and identifying the contact information for them, and things of that nature.

COMMISSIONER HOLT: Okay. Including handing out masks, right.

MR. BORUFF: Well, that was a great answer, Carlos.

Effectively historically, a business continuity plan has been primarily focused on information technology and how you recovery those IT systems in case of a failure precipitated by some natural or man-made disaster. At the direction of Mr. Smith, we decided to go in a more robust fashion and look at all of the operational issues that are associated with such disasters. And what really precipitated this is when the looming swine flu pandemic was out there, we began to ask ourselves questions, like if this whole building got the swine flu, who would keep the business of the Agency moving forward, not just from an information technology perspective, but from the field operations perspective.

COMMISSIONER HOLT: Okay.

MR. BORUFF: So Carlos, along with other key members of the senior staff are going to help us put together a much more robust and broad-ranging business continuity plan.

COMMISSIONER HOLT: Don't bog down in it, but then forget it. Keep it updated, too. The same old deal, you know. What you do now may not even be pertinent five years from now, relative to changes. Okay. All right. Any questions for Carlos? Yes, sir.

Commissioner Duggins.

COMMISSIONER DUGGINS: Carlos, when you were talking about focusing on the sand and gravel permittees, did you actually go in and audit compliance with the permit from top to bottom, or just royalty payments?

MR. CONTRERAS: No. We, the majority of our focus was on the royalty payments, and their source documentation to identify what payments were applicable and what were outside of the range of the payment process. But one of the things that we also wanted to take a look at was where these ‑‑ the equipment is lowered. A lot of times, they had gaps in there, where they said that they weren't dredging in an area that I guess, is subject to the payment and to the permit conditions. And so we took a look at that process too, to ensure that there was someone out there that was looking over their shoulder at any discrete moment, we would be able to know whether they were in a portion of the river where the permit requirements are applicable or not. So we took a look at that.

COMMISSIONER DUGGINS: Was it your conclusion that the Department was doing an adequate job of ensuring that the permittees were mining in the permitted spots and were paying the appropriate royalties, or do you think we need to improve that?

MR. CONTRERAS: Well, I think we need to improve it simply from the aspect that nobody was taking a look at the source documentation. What in essence was happening before was we were doing more of a cash count type of thing, where we take a look at the records that they provided, and the payment, and sort of just reconcile that.

We took the additional steps of going out to the permittees and examining their source documentation and getting the records that they printed out, so that we were able to identify invoices that were duplicated. We were able to identify gaps in some of their reporting. And so we were trying to tie that to the times that they were on the river itself.

COMMISSIONER DUGGINS: How many permittees did you examine?

MR. CONTRERAS: We examined two, sir.

COMMISSIONER DUGGINS: Were each of those underpaying on royalties?

MR. CONTRERAS: Yes, sir. At the time when we initiated the audit, both of them were seriously in arrears. One of them caught up. And then another one was making scheduled payments toward their delinquencies. And I know that one of the companies, there was an issue too with a bond that they had. You had to have a bond, set a certain amount of money to protect the state's interest. And we had some issues with that.

MR. SMITH: Commissioner, I can attest based on this. Just this is basically two companies owned by the same individual, that as Carlos had said, had fallen significantly in arrears in payments to the Agency that candidly, we had not caught. And so once we did figure that out, you know, we asked the internal audit team to conduct an audit of those operations and to work with the permittee on a restitution plan.

And so and as part of that, and the permittee was audited, and the audit team made recommendations to the permittee about how they could strengthen their business practices. And then it also made recommendations internal to the Agency about what we with Inland Fisheries and Legal and AR could do to make sure that we were, A, looking and verifying the source document, and, making sure that we were getting the revenue paid to us in a timely fashion. And those were areas that they identified that clearly, we needed to improve upon. So it was an isolated case, at least with this one or two permittees, two companies owned by the same individual. But it did identify some areas that we have for improvement throughout the whole program.

I think it is a timely audit, because as you heard earlier, we have just transferred that program from legal over to Inland Fisheries. And so it kind of gave us an opportunity to revisit all of the processes and systems that we had in place surrounding it.

COMMISSIONER DUGGINS: But are we going to follow up and check some of the other permittees and not just this one guy?

MR. SMITH: Absolutely.

MR. DUROCHER: That was part of what you heard. Excuse me. For the record, I am Phil Durocher. That is what you heard this morning. We are beginning the process of looking at all of these processes and trying to make them work better.

COMMISSIONER DUGGINS: And do our ‑‑ I guess our permits, is Ann here? Do our permits have audit rights, like an oil and gas lease, or not.

MS. BRIGHT: I am not sure. I know that we do audit them. And I am assuming they do. I think that we have that right. Whether it may be statutory. It may be in the actual permits. The other thing that happens, in order to make sure that we are getting what we are owed, is that law enforcement is also becoming more involved in actually going out. They are kind of the guys on the ground. They are how we first find out that someone is digging in the river. And they will call one of our staff here, and we will go out, and we will see if it is the type of thing that requires a permit.

What had happened before this transfer was that this process was very much distributed. And one of the things that we are really thankful for from Carlos' staff in pointing out is, really we needed to have a little bit more coordination. And I think that through this audit, through law enforcement is modifying their general orders, to make sure that they are our there making sure that they are doing what they are supposed to do. I think Inland Fisheries is going to be out there. And then we are going to be auditing them. But one of the things that we can do is to make sure that it is very clear that we do have audit rights in our permits.

COMMISSIONER DUGGINS: Well, if it is not statutory, I think it sure ought to be in the permit.

MS. BRIGHT: Very good point.

COMMISSIONER DUGGINS: And a duty to pay for the audit if we find them ‑‑ like that is what an oil and gas lease says. If you are such a ‑‑ some certain percent that you are underpaid, you pay for the entire cost of the audit.

MS. BRIGHT: If the Commission will authorize this, as we are going through these rules, that I think Rollin requested that we propose, if it turns out that we need a rule amendment, are you okay with us putting that in there as well?

COMMISSIONER HOLT: Yes. Absolutely. Good idea. You have got to see if you can, but yes.

MS. BRIGHT: Okay.

COMMISSIONER DUGGINS: This may not really be a question for Carlos. It may be one for Peter. But ‑‑

COMMISSIONER HOLT: If you have any trouble, it is for me.

COMMISSIONER DUGGINS: Given that the law enforcement officers handle so much cash, you said, $60 million, I know that we have had some discussion about being able to take credit cards. And I think you said that it requires legislative authority. Or I am not sure where that stands. But I think that would help in terms of controls and reduce the amount of cash they are having to handle, as long as we got a fee for processing the credit card. I am just curious where that stands.

MR. SMITH: Not on those fees. Why don't you have Gene ‑‑ because there was a bill that was in place in the Legislature that would have authorized us to do that, and unfortunately, it did not make it through in time. But Gene can talk to the specifics of that.

MR. MCCARTY: Gene McCarty, Deputy Executive Director for Administration. We did, there was legislation that was going through the process this last session that would allow us to retain the fee associated with a credit card. If we put a credit card in an office, we are going to have to pay 2-1/2 percent of the value of the cost that is being charged. We wanted to be able to retain that from what we have to remit to the Comptroller in terms of the sales taxes. We didn't get that through, but we are going to continue to work on it through the interim, and try something, maybe the same thing or something different this next year. Because that is, if we don't then it is just a cost to the Agency.

COMMISSIONER DUGGINS: Well, I understand why we don't do it. I am just suggesting that it would address a couple of things. It would lower the risk associated with handling that much cash, or safeguarding that much cash. But it would also expedite the processing of titling and transfer, in my view, anyway.

(Simultaneous discussion.)

COMMISSIONER HOLT: Cash or money order. Any other questions for Carlos or comments?

(No response.)

MR. CONTRERAS: Thank you.

COMMISSIONER HOLT: Carlos, Thank you very much. No further action required. This committee has concluded its business. We will now move on to the Outreach and Education Committee.

Chairman Martin, please call your committee to order.

(Whereupon, the meeting was concluded at 3:15 p.m.)

C E R T I F I C A T E

MEETING OF: Texas Parks and Wildlife Commission
Finance Committee
LOCATION: Austin, Texas
DATE: May 27, 2009

I do hereby certify that the foregoing pages, numbers 1 through 48, inclusive, are the true, accurate, and complete transcript prepared from the verbal recording made by electronic recording by Penny Bynum before the Texas Parks and Wildlife Commission.

6/09/09
(Transcriber) (Date)
On the Record Reporting, Inc.
3307 Northland, Suite 315
Austin, Texas 78731


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