Entire Bill Partial Bill: Sponsor(s): Month/Year Impact Begins: July 1, 2013 Date of Analysis: April 9, 2013

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1 REVENUE ESTIMATING CONFERENCE Tax: Lottery Issue: Lottery Advertising and Promotions $2.0 million and $4.0 million additional recurring appropriations Bill Number(s): SB 7040, SB 7042, HB 5001, HB 5003 Entire Bill Partial Bill: Sponsor(s): Month/Year Impact Begins: July 1, 2013 Date of Analysis: April 9, 2013 Section 1: Narrative a. Current Law: The Lottery s Paid Advertising and Promotions Appropriation for FY was $34,593,508, a one time increase of $4,000,000 over a previous budget of $30,593,508. b. Proposed Change: The 2013 General Appropriation Act would make this a recurring increase of $4,000,000. This also includes an analysis of a $2,000,000 recurring increase. Section 2: Description of Data and Sources Since 2003, a number of studies have addressed the relationship between Lottery advertising spending and the generation of proceeds for the Educational Enhancement Trust Fund (EETF). These studies have been conducted by Battelle Memorial Institute (Columbus, Ohio) under contract to the Lottery, by the Office of Program Policy Analysis and Government Accountability (OPPAGA), and by the Lottery itself. Consistently, these studies have found a net positive return to education funding from additional dollars spent on Lottery advertising. In other words, when the Lottery spends money on advertising, the additional EETF generated from the resulting increase in ticket sales is not only enough to recoup the advertising dollar spent, it actually yields additional education funding. The findings of the studies, including relevant, past REC impact estimates, are summarized in the attached Table 6. As an example, the latest REC Impact Conference on Lottery advertising (April 2012) found that, on average, each dollar spent on Lottery advertising would generate a net gain in EETF of $0.57 after the additional cost of the advertising was considered. The key data used in the present analysis focuses on what past studies have shown about the relationship between additional advertising spending, on the one hand, and changes in Lottery sales on the other. This analysis also uses appropriations figures from the General Appropriations Act; sales, EETF and input data from the March 6, 2013 edition of the Lottery Revenue Estimating Conference; and the findings of a January 2010 study by the Office of Program Policy Analysis and Governmental Accountability (OPPAGA). Section 3: Methodology (Include Assumptions and Attach Details) The FY spending plans for the full Lottery Paid Advertising and Promotions appropriation are still being refined as the Lottery considers opportunities for new games, brand promotion, education funding messaging, sponsorships and so on. The Lottery has been working to maximize its advertising effectiveness by increasing the proportion of its advertising funding devoted to media rather than production. The Lottery also is continuing to move toward a greater emphasis on paid media in support of the Scratch off Game product line as opposed to the terminal game or drawing game line (e.g., Florida Lotto, Powerball and Cash 3). Finally, the Lottery has gradually increased its Spanish language portion of its advertising budget in recognition of the growing strength of that market. In essence, the methodology employed in what follows applies lottery advertising impact study results to FY appropriations and to baseline sales or EETF forecasts from the March 6, 2013 Lottery Revenue Estimating Conference. The High Estimate is based on the findings of the study by the Battelle Memorial Institute, adjusted to the latest REC forecast and discounted by 10% as a reflection of the age of the data. The Battelle Study examined the annual advertising spending from Florida and nineteen other lotteries with similar annual sales and game offerings. The study presented a multiple regression formula that accurately replicated Florida s annual sales over and eight year period, based on adult population, advertising spending, the number of lottery retailers and the size of the lottery sales force. This model was applied to the increase in the advertising appropriation. In a similar manner, the Low Estimate was based on the findings of the OPPAGA Report No (January 2010) "Lottery Jackpots, Retailer Density, and Advertising Drive Transfers to Education. That study analyzed monthly lottery sales, advertising 350

2 REVENUE ESTIMATING CONFERENCE Tax: Lottery Issue: Lottery Advertising and Promotions $2.0 million and $4.0 million additional recurring appropriations Bill Number(s): SB 7040, SB 7042, HB 5001, HB 5003 expenditures and other economic data from the period, with adjustments for jackpots and market conditions. Here too, this study used regression analysis to quantify the relationship between advertising spending and sales. The OPPAGA report acknowledged the possibility of adverse impacts of the economic recession on the advertising ROI:"... Since the three years we examined include the worst economic downturn in recent Florida history, our return on investment estimates may understate returns on advertising spending." The Middle Estimate was calculated merely by taking the mid point between the high and low estimates. The sales forecasts for FY then were reconciled to the model the REC routinely uses in its estimating conferences to calculate the amount of EETF to be generated from forecasted sales. Tables 3 and 5 show this model for FY in two ways: first, reflecting the baseline March 2013 REC forecast without the additional advertising funding, and second, showing the model as it would appear with the additional $4,000,000 or $2,000,000 in Paid Advertising and Promotions appropriation and the resulting increases in sales and transfers to the EETF.. NOTE: For this analysis, the gaming vendor fees used in the adoption of the March 6, 2013 forecast have been maintained and do not include additional fees for equipment that might be included in the General Appropriation Act for FY The estimates for the years beyond FY were calculated by adding the FY sales impact figure to the adopted sales estimates for each fiscal year and then calculating the resulting impact to EETF transfers. Because advertising spending can be implemented relatively quickly and since there is considerable lead time before the start of the next fiscal year, no phase in factor was used in the calculations. Section 4: Proposed Fiscal Impact for $4,000,000 Increase High Middle Low Cash Recurring Cash Recurring Cash Recurring Proposed Fiscal Impact for $2,000,000 Increase High Middle Low Cash Recurring Cash Recurring Cash Recurring List of affected Trust Funds: Educational Enhancement Trust Fund 351

3 REVENUE ESTIMATING CONFERENCE Tax: Lottery Issue: Lottery Advertising and Promotions $2.0 million and $4.0 million additional recurring appropriations Bill Number(s): SB 7040, SB 7042, HB 5001, HB 5003 Section 5: Consensus Estimate (Adopted:04/09/2013) The conference adopted the low estimate. $4,000,000 increase GR Trust Local/Other Total Cash Recurring Cash Recurring Cash Recurring Cash Recurring $2,000,000 increase GR Trust Local/Other Total Cash Recurring Cash Recurring Cash Recurring Cash Recurring

4 Table 1. EETF transfers Additional Advertising Impact Estimate - April 9, 2013 Impact Conference Low Estimate (OPPAGA ROI) March 6, 2013 REC $4m adv increase difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , , , , , , , , , , , , , , , , , March 6, 2013 REC $2m adv increase difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , , , , , , , , , , , , , , , , , High Estimate (Battelle ROI) difference/impact March 6, 2013 REC $4m adv increase difference/impact w/10% reduction EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , , , , , , , , , , , , , , , , , difference/impact March 6, 2013 REC $2m adv increase difference/impact w/10% reduction EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , , , , , , , , , , , , , , , , ,

5 TABLE 2 Estimate of Change in Sales from $4 Million Increased Spending on Lottery Paid Advertising and Promotions NOTE: Advertising-EETF Relationship Based on OPPAGA Report: "Lottery Jackpots, Retailer Density, and Advertising Drive Transfers to Education" (January 2010) ASSUMPTIONS Baseline Change With Additional Ad/Promo Funding $ % Gross Sales Return on Ad/Promotion Dollar Spent: Net of Ad Cost Paid Ad/Promotions Appropriation $ 30,593,508 $ 34,593,508 $ 4,000, % EETF Contribution Rate from Sales Based on Standard REC Sales/Revenue Model OPPAGA Findings Lottery Sales Increase Per $1 in Media Expenditures $ 5.03 Lottery Sales Increase Per $1 in Total Advertising Expenditures $ 3.67 Transfers to Educational Enhancement Trust Fund (Per $1 of $ 1.57 Total Advertising Spending) SALES FY Lottery Sales March REC $ 4,903,200,000 Projected FY Sales with Additional Paid Ad/Promotions Funding Based on EETF Return on Media Expenditures $ 4,923,320,000 $ 20,120, % $

6 Table 3. $4 Million--Model Revision Lottery EETF Calculations 9-Apr-13 No Increase in Paid Advertising and Promotion Funding $4 Million Increase in Paid Advertising and Promotion Funding--Sales and EETF Impacts Based on 2010 OPPAGA Reprt Findings Regarding Media Expenditures 03/06/13 Adopted REC 3/6/2013 Transfer Rate Model FY 13/14 Transfer Rate Model FY 13/14 Scratch-off On-line Total Scratch-off On-line Total Prize Exp. % % % Prize Exp. % 73.00% % Sales Forecast 2,990,800,000 1,912,400,000 4,903,200,000 Sales Forecast 3,003,225,200 1,920,094,800 4,923,320,000 Prize Exp 2,183,284, ,481,032 Prize Exp 2,192,354, ,389,917 Commissions (5.6%) 167,484, ,094,400 Commissions (5.6%) 168,180, ,525,309 Vendor Fees (Adj to Total EETF) 47,386,534 31,837,061 Admin. Funding Vendor Fees (Adj to Total EETF) 47,583,400 31,965,162 Admin. Funding Oper. Exp. 43,385,875 27,742,125 71,128,000 Oper. Exp. 45,828,080 29,299,920 75,128,000 EETF from Sales 549,258, ,245,381 1,323,504,172 EETF from Sales 549,278, ,914,491 1,325,193, % 40.49% % 18.29% 40.41% % 61.00% 39.00% 80% Unclaimed 36,279,798 80% Unclaimed 36,429,060 Other Revenue 13,500,000 Other Revenue 13,500,000 impact Total EETF Trans. 1,373,283,970 Total EETF Trans. 1,375,122,264 1,838,294 Total Transfer Rate 28.01% Total Transfer Rate 27.93% 355

7 TABLE 4 Estimate of Change in Sales from $2 Million Increased Spending on Lottery Paid Advertising and Promotions NOTE: Advertising-EETF Relationship Based on OPPAGA Report: "Lottery Jackpots, Retailer Density, and Advertising Drive Transfers to Education" (January 2010) ASSUMPTIONS Baseline Change With Additional Ad/Promo Funding $ % Gross Sales Return on Ad/Promotion Dollar Spent: Net of Ad Cost Paid Ad/Promotions Appropriation $ 30,593,508 $ 32,593,508 $ 2,000, % EETF Contribution Rate from Sales Based on Standard REC Sales/Revenue Model OPPAGA Findings Lottery Sales Increase Per $1 in Media Expenditures Lottery Sales Increase Per $1 in Total Advertising Expenditures Transfers to Educational Enhancement Trust Fund (Per $1 of Total Advertising Spending) $ $ $ SALES FY Lottery Sales March REC $ 4,903,200,000 Projected FY Sales with Additional Paid Ad/Promotions Funding Based on EETF Return on Media Expenditures $ 4,913,260,000 $ 10,060, % $

8 Table 5. $2 Million--Model Revision Lottery EETF Calculations 9-Apr-13 No Increase in Paid Advertising and Promotion Funding $2 Million Increase in Paid Advertising and Promotion Funding--Sales and EETF Impacts Based on 2010 OPPAGA Reprt Findings Regarding Media Expenditures 03/06/13 Adopted REC 3/6/2013 Transfer Rate Model FY 13/14 Transfer Rate Model FY 13/14 Scratch-off On-line Total Scratch-off On-line Total Prize Exp. % 73.00% % Prize Exp. % 73.00% % Sales Forecast 2,990,800,000 1,912,400,000 4,903,200,000 Sales Forecast 2,997,089,000 1,916,171,000 4,913,260,000 Prize Exp 2,183,284, ,481,032 Prize Exp 2,187,874, ,396,664 Commissions (5.6%) 167,484, ,094,400 Commissions (5.6%) 167,836, ,305,576 Vendor Fees (Adj to Total EETF) 47,386,534 31,837,061 Admin. Funding Vendor Fees (Adj to Total EETF) 47,486,178 31,899,840 Admin. Funding Oper. Exp. 43,385,875 27,742,125 71,128,000 Oper. Exp. 44,608,086 28,519,914 73,128,000 EETF from Sales 549,258, ,245,381 1,323,504,172 EETF from Sales 549,282, ,049,006 1,324,331, % 40.49% % 18.33% 40.45% % 61.00% 39.00% 80% Unclaimed 36,279, % Unclaimed 36,354,623.8 Other Revenue 13,500,000.0 Other Revenue 13,500,000.0 impact Total EETF Trans. 1,373,283,970 Total EETF Trans. 1,374,186, ,442 Total Transfer Rate 28.01% Total Transfer Rate 27.97% 357

9 TABLE 6 Overview of Estimates of the Return on Investment for Every Dollar Spent on Florida Lottery Advertising 9-Apr-13 Note: Dollar estimates are average rates of return for $1 spent on advertising Sales Return on Investment (or Budget Reduction) EETF Return on Investment EETF Net Return After Considering Advertising Cost or Savings Florida Lottery Analysis: Advertised vs Non-advertised Games (March 2003) $ 7.71 $ 2.11 $ 1.11 Compared the first 13 weeks of sales for two nearly identical Scratch-off Games launched under similar conditions. One of the games was advertised; the other was not. Florida Lottery Analysis: Comparing Lottery Spending by Players Recalling and Those Not Recalling Advertising (March 2003) $ 5.49 $ 1.97 $ 0.97 Based on tracking survey data of past-month playership percentages and monthly spending. Compared spending by players who could recall Lottery advertising to spending by players who could not recall Lottery advertising. Expanded results to adult population and annualized sales difference. Battelle Memorial Institute Study, Columbus, Ohio ( ) Analyzed the relationship between advertising spending and sales over time in Florida and 19 similar lottery states. Developed regression equation for predicting sales and education funding based on advertising spending and several other variables. $ $ 5.00 $ 4.00 Florida Revenue Estimating Conference (REC) Impact Conference (March 2007) $ (16.28) $ (4.62) $ (3.62) Analyzed proposed elimination of Lottery's advertising budget. Considered results of Battelle Memorial Study noted above and two other approaches. Adopted a "middle forecast" based on the Battelle Study. Florida Revenue Estimating Conference (REC) Impact Conference (April 2007) $ (13.00) $ (4.67) $ (3.67) Analyzed proposed prohibition against the Lottery spending advertising money on sponsorship events and an associated reduction in the Lottery's advertising budget by $3.0 million. Again used "middle forecast" from March 19, 2007, impact conference (based on Battelle Study regression formula). Applied the percentage rate of advertising funding reduction (9%) to the previously estimated impact of elimination of advertising funding. Florida Revenue Estimating Conference (REC) Impact Conference (February 2008) $ $ 4.25 $ 3.25 Analyzed a proposed $5.14 million increase to the Lottery's advertising budget. Considered the Battelle memorial Institute Study noted above. Reduced the EETF impacts by 10%. OPPAGA Report No (January 2010)--"Lottery Jackpots, Retailer Density, and Advertising Drive Transfers to Education"* OPPAGA Results for All Lottery Advertising Costs $ 3.68 $ 1.15 $ 0.15 OPPAGA Results for Lottery Advertising Media Costs Only $ 5.03 $ 1.57 $ 0.57 Analyzed Lottery monthly sales (July 2006-June 2009) and monthly expenditures on advertising (March 2006-March 2009), along with other economic data for ten market areas in Florida. Developed a least squares time series regression to predict monthly sales per capita. Differentiated among the production spending, media spending and ad agency fees. April 2012 Florida Lottery analysis of monthly media spending promoting Scratch-off Games $ $ 2.46 $ 1.46 Analyzed the relationship between media spending during a month and sales gains during that month for Scratch-off Games in FY Florida Revenue Estimating Conference (REC) Impact Conference (April 2012) $ 5.03 $ 1.57 $ 0.57 Estimated the impact of a $4 million increase to the Lottery's advertising budget in the Appropriations Act for FY Based the analysis on the results of the January 2010 OPPAGA Study which found an average return of $1.57 in EETF per dollar spent Lottery Advertising media. 358

10 REVENUE ESTIMATING CONFERENCE Tax: Lottery Issue: Additional Full Service Vending Machines Bill Number(s): Appropriations Entire Bill X Partial Bill: Sponsor(s): Month/Year Impact Begins: October 2013 Date of Analysis: April 9, 2013 Section 1: Narrative Current Law: In 2012, the authorization to dispense online tickets was granted by the Florida Legislature in s. 3, ch Section (15), F.S. provides authorization of vending machines to dispense lottery tickets. Such machines may be used to dispense online lottery tickets, instant lottery tickets, or both online and instant lottery tickets. The Legislature also appropriated $2.94 million to lease Full Service Vending Machines (FSVMs) for FY Previously, the Legislature had authorized the leasing and installation of Instant Ticket Vending Machines (ITVMs). For FY , 1,000 ITVMs were authorized; for FY , 500 additional ITVMs were authorized The Lottery installed 500 FSVMs primarily in high volume supermarkets throughout the state during a period extending from September to November The Lottery has calculated that these locations so far have accumulated $9 million in additional sales after controlling for sales growth experienced statewide by retailers not having FSVMs. It should be noted that nearly all of the retailers receiving FSVMs had already been using ITVMs. Upon installation of the FSVMs, the ITVMs were shifted to new locations to extend the self service reach of the Lottery. FSVMs are much like a typical vending machine in that money is inserted, a button is pressed, or a standard play slip is inserted, and the desired product is then dispensed from the machine. In compliance with state statute, FSVMs can be remotely disabled in order to prevent underage players from purchasing tickets. The machine transmits sales information in real time to the in store terminal, allowing for more effective accounting and tracking of ticket inventory, greatly enhancing the retailers and the Lottery s ability to monitor and manage scratch off inventory while also selling terminal games. In order to continue growth of Lottery revenues and the resulting transfers to the Educational Enhancement Trust Fund (EETF), the Florida Lottery is proposing an increase in the distribution network for the sale of Lottery products. To continue the growth pattern, the Florida Lottery is requesting $2,916,000 to lease an additional 300 FSVMs for placement at retailer locations throughout the state, most of which will be new retailers. FSVMs currently in place have demonstrated that the self service feature in retailer locations supplements the counter sales activity. The self service feature has attracted the interest of new groups of large chain retailers who have previously expressed concern over the labor intensive nature of the existing customer service counter business model. The lack of full service equipment was cited as an obstacle in the past when trying to recruit new corporate retailers. The availability of self service machines that dispense both instant and on line lottery game tickets, in all probability, will be the key factor in the Florida Lottery s ability to persuade larger corporate retailers in some cases, big box stores to begin selling lottery tickets. In these times, retail customers increasingly prefer self service options in their purchasing. Perhaps more important to the lottery industry, major corporate retailers place a great emphasis on managing labor costs and thorough inventory accounting. In Florida s experience, at least two large retailer chains had decided to begin offering lottery products only to reverse their decision upon learning that full service vending machines were not available. A very successful convenience store chain from the Northeast is expanding into Florida but insists that it will only sell lottery tickets if provided with FSVMs. The Lottery has been approached by two new corporate retailers and is pursuing a third that is looking for a completely self service model for implementation. These three entities would require approximately 200 units. Two existing retailers have identified new location needs that would use the other 100 units. The Revenue Estimating Conference (REC) adopted an impact for FSVMs last year of $21.0 million in the first full year of operation. Proposed Change: The Lottery is requesting funding to support growth in sales and Educational Enhancement Trust Fund (EETF) contributions, both by enhancing the ticket sales capabilities in current, strongly performing retail locations and by making it 359

11 REVENUE ESTIMATING CONFERENCE Tax: Lottery Issue: Additional Full Service Vending Machines Bill Number(s): Appropriations possible to increase the number of retail businesses selling Lottery tickets. More specifically, the Lottery is seeking an additional appropriation of $2,916,000 to lease an estimated 300 FSVMs at an assumed leasing fee of $810 per machine per month. The current plan would be to place 200 of the FSVMs at new corporate retail locations which will likely be operated as self service lottery sellers and compensated at a lower sales commission rate. The remaining 100 FSVMs would replace existing ITVMs in some of the top producing retailer locations, retailers that also have a record of strong On line Game sales. This would free up 100 ITVMs, at no additional costs to the Lottery Section 2: Description of Data and Sources In almost all cases, the sales data used in this analysis is from the Lottery s Business Objects database and GTECH s Enterprise System. This reflects the actual business experience of the Lottery. Assumptions regarding baseline sales forecasts and EETF contribution rates are taken from the report of the February 2013 Lottery Revenue Estimating Conference. Section 3: Methodology (Include Assumptions and Attach Details) The planned placement of 200 FSVMs at new corporate retailer locations and 100 at existing retail locations creates three types of incremental revenue streams: 1. Enhanced sales at existing Lottery retail locations, currently equipped with ITVMs but upgraded to FSVMs. 2. Sales at 200 corporate locations which have never before sold Florida Lottery tickets. 3. Enhanced sales at 100 existing retail locations being given ITVMs for the first time, i.e., the ITVMs displaced by the 100 noted in the first category. The methodology and assumptions used in this analysis are made clear in the labeling and notes accompanying each of the attached tables. Detailed analyses, reflected in the attached tables, were used to generate the cash and recurring impact figures for FY For the remaining years, the annual percentage growth rates in sales forecasted by the February 2013 (March 6 Revision) Lottery Revenue Estimating Conference were applied to the FY recurring sales impact figure. The resulting sales estimates then were used in the standard EETF model to calculate an EETF estimate for each year. Finally, those estimates were compared to the baseline forecast to yield yearly estimates of EETF impacts. Section 4: Proposed Fiscal Impact Cash EETF Transfers High Middle Low Cash Recurring Cash Recurring Cash Recurring List of affected Trust Funds: Educational Enhancement Trust Fund Section 5: Consensus Estimate (Adopted:04/09/2013) The conference adopted the middle estimate. GR Trust Local/Other Total Cash Recurring Cash Recurring Cash Recurring Cash Recurring

12 Table 1. EETF transfers HIGH Additional FSVMs Impact Estimate - April 9, 2013 Impact Conference March 6, 2013 REC 300 FSVMs Recurring difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , , , , , , , March 6, 2013 REC 300 FSVMs Cash difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , MIDDLE Additional FSVMs Impact Estimate - April 9, 2013 Impact Conference March 6, 2013 REC 300 FSVMs Recurring difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , , , , , , , March 6, 2013 REC 300 FSVMs Cash difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , LOW Additional FSVMs Impact Estimate - April 9, 2013 Impact Conference March 6, 2013 REC 300 FSVMs Recurring difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , , , , , , , , March 6, 2013 REC 300 FSVMs Cash difference/impact EETF Accrual EETF Cash EETF Accrual EETF Cash EETF Accrual EETF Cash , , , ,

13 TABLE 1 HIGH Detailed Impact Analysis: Full-Service Vending Machines 9-Apr-13 FY Recurring FY cash Sales Increase by Category Sales Considering Sales Shift Sales Increase by Category (Partial Yr.) Sales Considering Sales Shift Upgrades of ITVMs to FSVMs $ 3,958,240 $ 3,958,240.0 $ 2,968,680 $ 2,968,680.0 Number of Retailers Switching from ITVMs to FSVMs 100 Current Average Weekly Total Sales of Retailers Switching from ITVMs to FSVMs Avg % Increase in Sales from Retailers Switching from ITVMs to FSVMs (as a % of Total Sales) $ 22, % Sales Shift Factor for This Category 0% Phase-in Factor--Year One (Weeks) for cash 39 New Corporate Retailers $ 104,000,000 $ 78,000,000 $ 46,800,000 $ 35,100,000 Number of New Corporate Retailers Equipped with FSVMs and Employing a Self-Service Model 200 Average Weekly Sales Over First Year 6000 Average Weekly Sales Over Second Year Sales Shift Factor for This Category -25% Phase-in Factor--Year One (Weeks) for cash 39 Retailers Given Displaced ITVMs $ 748,800 $ 748,800 $ 561,600 $ 561,600 Number of Additional Retailers Getting ITVMs Freed-up by FSVM Placement 100 Avg Weekly Scratch-off Sales of Retailers Prior to Receiving ITVMs 4800 Net % Increase in Scratch-off Sales from New ITVMs (as a % of Scratch-off sales) 3.00% Sales Shift Factor for This Category 0% Phase-in Factor--Year One (Weeks) for cash 39 Total Sales Impact $ 82,707,040 $ 38,630,

14 TABLE 1 MIDDLE Detailed Impact Analysis: Full-Service Vending Machines 9-Apr-13 FY Recurring FY cash Sales Increase by Category Sales Considering Sales Shift Sales Increase by Category (Partial Yr.) Sales Considering Sales Shift Upgrades of ITVMs to FSVMs $ 3,058,640 $3,058,640.0 $ 2,293,980 $ 2,293,980.0 Number of Retailers Switching from ITVMs to FSVMs 100 Current Average Weekly Total Sales of Retailers Switching from ITVMs to FSVMs $ 17,000 Avg % Increase in Sales from Retailers Switching from ITVMs to FSVMs (as a % of Total Sales) 3.46% Sales Shift Factor for This Category 0% Phase-in Factor--Year One (Weeks) for cash 39 New Corporate Retailers $ 69,680,000 $ 52,260,000 $ 35,100,000 $ 26,325,000 Number of New Corporate Retailers Equipped with FSVMs and Employing a Self-Service Model 200 Average Weekly Sales Over First Year 4500 Average Weekly Sales Over Second Year 6700 Sales Shift Factor for This Category -25% Phase-in Factor--Year One (Weeks) for cash 39 Retailers Given Displaced ITVMs $ 748,800 $ 748,800 $ 561,600 $ 561,600 Number of Additional Retailers Getting ITVMs Freed-up by FSVM Placement 100 Avg Weekly Scratch-off Sales of Retailers Prior to Receiving ITVMs 4800 Net % Increase in Scratch-off Sales from New ITVMs (as a % of Scratch-off sales) 3.00% Sales Shift Factor for This Category 0% Phase-in Factor--Year One (Weeks) for cash 39 Total Sales Impact $ 56,067,440 $ 29,180,

15 TABLE 1 LOW Detailed Impact Analysis: Full-Service Vending Machines 9-Apr-13 FY Recurring FY cash Sales Increase by Category Sales Considering Sales Shift Sales Increase by Category (Partial Yr.) Sales Considering Sales Shift Upgrades of ITVMs to FSVMs $ 2,159,040 $2,159,040.0 $ 1,619,280 $ 1,619,280.0 Number of Retailers Switching from ITVMs to FSVMs 100 Current Average Weekly Total Sales of Retailers Switching from ITVMs to FSVMs $ 12,000 Avg % Increase in Sales from Retailers Switching from ITVMs to FSVMs (as a % of Total Sales) 3.46% Sales Shift Factor for This Category 0% Phase-in Factor--Year One (Weeks) for cash 39 New Corporate Retailers $ 33,280,000 $ 24,960,000 $ 21,840,000 $ 16,380,000 Number of New Corporate Retailers Equipped with FSVMs and Employing a Self-Service Model 200 Average Weekly Sales Over First Year 2800 Average Weekly Sales Over Second Year 3200 Sales Shift Factor for This Category -25% Phase-in Factor--Year One (Weeks) for cash 39 Retailers Given Displaced ITVMs $ 748,800 $ 748,800 $ 561,600 $ 561,600 Number of Additional Retailers Getting ITVMs Freed-up by FSVM Placement 100 Avg Weekly Scratch-off Sales of Retailers Prior to Receiving ITVMs 4800 Net % Increase in Scratch-off Sales from New ITVMs (as a % of Scratch-off sales) 3.00% Sales Shift Factor for This Category 0% Phase-in Factor--Year One (Weeks) for cash 39 Total Sales Impact $ 27,867,840 $ 18,560,

16 TABLE 2 HIGH Full-Service Vending Machine Impacts by Category 9-Apr-13 FY Recurring FY Cash Sales Increase Equipment Costs Net Accrual EETF Considering Costs Sales Increase Equipment Costs Net Accrual EETF Considering Costs Upgrades of ITVMs to FSVMs $ 3,958,240 $ 577,200 $ 2,968,680 $ 432,900 New Corporate Retailers $ 78,000,000 $ 1,944,000 $ 35,100,000 $ 1,458,000 Retailers Given Displaced ITVMs $ 748,800 $ - $ 561,600 $ - TOTALS $ 82,707,040 $ 2,521,200 $ 21,176,535 $ 38,630,280 $ 1,890,900 $ 9,192,334 ASSUMPTIONS Annual Equipment Cost Appropriation $ 2,916,000 Total Number of Additional FSVMs 300 Monthly Fee Per Machine-Upgrade from ITVM to FSVM $ 481 Monthly Fee Per Machine-FSVMs for retailers having no Lottery vending machines. $ 810 Phase-in Factor--Year One Sales Increase from Upgrades to FSVMs and Relocated ITVMs (Weeks) 39 Phase-in Factor--Year One Costs of Upgrades to FSVMs (Months) 9 365

17 TABLE 2 MIDDLE Full-Service Vending Machine Impacts by Category 9-Apr-13 FY Recurring FY Cash Sales Increase Equipment Costs Net Accrual EETF Considering Costs Sales Increase Equipment Costs Net Accrual EETF Considering Costs Upgrades of ITVMs to FSVMs $ 3,058,640 $ 577,200 $ 2,293,980 $ 432,900 New Corporate Retailers $ 52,260,000 $ 1,944,000 $ 26,325,000 $ 1,458,000 Retailers Given Displaced ITVMs $ 748,800 $ - $ 561,600 $ - TOTALS $ 56,067,440 $ 2,521,200 $ 13,560,412 $ 29,180,580 $ 1,890,900 $ 6,490,714 ASSUMPTIONS Annual Equipment Cost Appropriation $ 2,916,000 Total Number of Additional FSVMs 300 Monthly Fee Per Machine-Upgrade from ITVM to FSVM $ 481 Monthly Fee Per Machine-FSVMs for retailers having no Lottery vending machines. $ 810 Phase-in Factor--Year One Sales Increase from Upgrades to FSVMs and Relocated ITVMs (Weeks) 39 Phase-in Factor--Year One Costs of Upgrades to FSVMs (Months) 9 366

18 TABLE 2 LOW Full-Service Vending Machine Impacts by Category 9-Apr-13 FY Recurring FY Cash Sales Increase Equipment Costs Net Accrual EETF Considering Costs Sales Increase Equipment Costs Net Accrual EETF Considering Costs Upgrades of ITVMs to FSVMs $ 2,159,040 $ 577,200 $ 1,619,280 $ 432,900 New Corporate Retailers $ 24,960,000 $ 1,944,000 $ 16,380,000 $ 1,458,000 Retailers Given Displaced ITVMs $ 748,800 $ - $ 561,600 $ - TOTALS $ 27,867,840 $ 2,521,200 $ 3,454,597 $ 18,560,880 $ 1,890,900 $ 5,498,293 ASSUMPTIONS Annual Equipment Cost Appropriation $ 2,916,000 Total Number of Additional FSVMs 300 Monthly Fee Per Machine-Upgrade from ITVM to FSVM $ 481 Monthly Fee Per Machine-FSVMs for retailers having no Lottery vending machines. $ 810 Phase-in Factor--Year One Sales Increase from Upgrades to FSVMs and Relocated ITVMs (Weeks) 39 Phase-in Factor--Year One Costs of Upgrades to FSVMs (Months) 9 367

19 REVENUE ESTIMATING CONFERENCE Tax: Rental car surcharge / Sales tax / Local discretionary surtax Issue: Car sharing service 8 cent Surcharge Bill Number(s): SB140 Proposed amendment x Entire Bill Partial Bill: Sponsor(s): Month/Year Impact Begins: July 1, 2013 (with one month s collection lag) Date of Analysis: 4/8/2013 Section 1: Narrative a. Current Law: Car rentals are subject to $2.00 rental car surcharge per day for the first 30 days, except (4) exempt motor vehicles provided at no charge to people whose vehicles are being repaired, adjusted, or serviced by the entities providing the replacement vehicles. Under the current law, the rental car surcharge is subject to sales tax and local discretionary surtax. b. Proposed Change: add (4)(b), F.S.; a motor vehicle provide to a person who is a registered member of a car sharing service for a fee. A car sharing service means a business with pre approved membership criteria requirements that provides the use of a motor vehicle through decentralized automated access for a limited time to registered members for a fee. Rental car surcharge is 8 cents per hour, partial portions of an hour shall be rounded up to the next hour for calculation purposes. Section 2: Description of Data and Sources DOR rental car surcharge data REC Feb 2013 Transportation conference, rental car surcharge growth rate Section 3: Methodology (Include Assumptions and Attach Details) Assuming the middle estimates is 0.27% of the state total days plus 30% Assuming the High estimates are twice the low estimates to account for change of the business practice The first year s cash is 11/12 Impact Conference on 4/5/2013 adopted the average of the middle and high estimates 50% of the trips are less than one hour, therefore, no surcharge. Assuming percent of hours as 10% for 2 hrs, 4 hrs, 6 hrs, 8 hrs and 10 hrs for each trip. Section 4: Proposed Fiscal Impact Rental car surcharge High Middle Low Cash Recurring Cash Recurring Cash Recurring m 0.6m m 0.6m m.07m m 0.7m m 0.7m Sales tax insig. insig insig. insig insig. insig insig. insig insig. insig. List of affected Trust Funds: Rental car surcharge; sales tax Section 5: Consensus Estimate (Adopted: 04/09/2013) The conference adopted the proposed estimate. GR Trust Local/Other Total Cash Recurring Cash Recurring Cash Recurring Cash Recurring (Insignificant) (Insignificant) (0.5) (0.6) (Insignificant) (Insignificant) (0.5) (0.6) (Insignificant) (Insignificant) (0.6) (0.6) (Insignificant) (Insignificant) (0.6) (0.6) (0.1) (0.1) (0.6) (0.6) (Insignificant) (Insignificant) (0.7) (0.7) (0.1) (0.1) (0.6) (0.6) (Insignificant) (Insignificant) (0.7) (0.7) (0.1) (0.1) (0.6) (0.6) (Insignificant) (Insignificant) (0.7) (0.7) 368

20 CS HB 140 Car-sharing service A B C D E F G H I J K L CS/HB 647 car-sharing service partial rental car estimated days days FY ,629 FY , % FY , % FY , % of state total CY , % 210, % days Miami-Dade Pinellas Hillsborough Duval Orange Broward Palm Beachtotal 7 cnty state total state grwth FY ,376,984 1,195,010 6,064,757 3,324,684 15,859,891 9,360,974 4,068,704 50,251,004 66,800,000 FY ,659,927 1,183,431 5,716,797 3,225,780 15,163,999 9,396,453 3,921,777 49,268,164 63,400, % FY ,408,302 1,138,146 5,478,258 3,524,723 16,028,951 10,552,126 4,327,187 53,457,694 68,210, % FY ,579,975 1,464,105 6,706,257 3,731,595 16,916,760 11,296,764 4,399,534 58,094,991 74,800, % CY ,213,859 1,624,079 7,891,140 4,155,105 19,673,484 13,275,182 5,314,432 67,147,280 77,491,391 average share of the state rental car day total by county based on FY 2011, FY 2012 and CY 2012 share 18.69% 1.92% 9.10% 5.18% 23.86% 15.93% 6.37% 81.04% days 210,364 % of Miami 1.38% % of the state total 0.27% REC 2/2013 Miami-Dade Pinellas Hillsborough Duval Orange Broward Palm Beachtotal 7 cnty state total growth FY ,929,841 1,531,436 7,274,534 4,134,997 19,066,881 12,727,418 5,087,896 64,753,003 79,900, % FY ,284,868 1,567,854 7,447,521 4,233,326 19,520,286 13,030,072 5,208,885 66,292,812 81,800, % FY ,733,324 1,613,854 7,666,030 4,357,532 20,093,008 13,412,373 5,361,712 68,237,833 84,200, % FY ,256,523 1,667,522 7,920,957 4,502,438 20,761,184 13,858,390 5,540,012 70,507,025 87,000, % FY ,779,721 1,721,189 8,175,884 4,647,344 21,429,360 14,304,407 5,718,311 72,776,216 89,800, % FY ,246,862 1,769,106 8,403,498 4,776,724 22,025,946 14,702,637 5,877,507 74,802,280 92,300, % Methodology I 0.27% 1.38% of LOW of state tota MIDDLE HIGH Impact Miami-Dade days plus 30% days days FY , , ,692 FY , , ,093 FY , , ,562 FY , , ,031 FY , , ,949 Impact $2.00 per day LOW % of state MIDDLE % of state HIGH % of state FY 2014 $422, % $577, % $845, % FY 2015 $435, % $594, % $870, % FY 2016 $449, % $614, % $899, % FY 2017 $464, % $633, % $928, % FY 2018 $476, % $651, % $953, % Middle is 0.27% of the state total days plus 30%; and High is twice the low estimates sales tax on rental car surcharge 6% plus local option discretionary surtax LOW MIDDLE HIGH FY 2014 $25,362 $34,641 $50,723 FY 2015 $26,106 $35,658 $52,211 FY 2016 $26,974 $36,844 $53,947 FY 2017 $27,842 $38,029 $55,684 FY 2018 $28,617 $39,088 $57,234 Adopted the average of Middle and High on 4/5/2013 Impact Conference Based on the industry information, 50% of the rental trips is less than one hour, thus no surcharge. 8 cents surcharge 6% avg(m+h) rental trips 10% 2 hr 10% 4 hr 10% 6hr 10% 8hr 10% 10hr tot surcharge Impact sales tax FY 2014 $711, ,685 $5,691 $11,382 $17,073 $22,764 $28,455 $85,364 $626,006 $37,560 FY14 cash $652,089 $78,251 $573,839 $34,430 FY 2015 $732, ,121 $5,858 $11,716 $17,574 $23,432 $29,290 $87,869 $644,373 $38,662 FY 2016 $756, ,296 $6,053 $12,105 $18,158 $24,211 $30,264 $90,791 $665,801 $39,948 FY 2017 $780, ,471 $6,248 $12,495 $18,743 $24,990 $31,238 $93,713 $687,229 $41,234 FY 2018 $802, ,342 $6,421 $12,843 $19,264 $25,686 $32,107 $96,322 $706,361 $42,382 Impact Converence 4/8/

21 REVENUE ESTIMATING CONFERENCE Tax: Sales and Use Tax Issue: Off Highway Fuel Tax Exemption for Dyed Diesel Fuel Used in Commercial Shrimp Fishing Bill Number(s): SB960 Proposed Amendment x Entire Bill Partial Bill: Sponsor(s): Month/Year Impact Begins: July 1, 2013 (with one month s collection lag) Date of Analysis: 4/4/2013 Section 1: Narrative a. Current Law: a portion of commercial fishing is currently not exempt from sales tax on the dyed fuel used b. Proposed Change: add section (4) in (4)(a)4 to exempt sales and use tax on dyed diesel fuel used in commercial shrimp fishing. Section 2: Description of Data and Sources ES 202 wage data FY naics code shrimp fishing Florida Statistical Abstract 2011 naics code 1141xx commercial fishing DOR annual sales tax data, taxable value of dyed diesel fuel from CY FWC commercial fishing license for FY and FY REC Feb 2013 Transportation diesel fuel gallons growth rates from FY REC Feb 2013 Transportation Florida pump price growth rates from FY REC Feb 2013 Transportation off highway collection growth rates from FY Section 3: Methodology (Include Assumptions and Attach Details) Derive taxable value of dyed diesel fuel used in commercial fishing and number of business in 1141xx Assume 40% of 1141xx are shrimp fishing (exclude fishing, crabbing, oysters and scalloping) Feb 1, 2013 impact conference adopted the average of the middle and low estimates as the shrimp fishing estimates. Feb 15, 2013 impact conference adopted the low estimates as the commercial fishing impact. Apr 5, 2013 impact conference adopted the low estimates as the commercial fishing impact, of which the majority is the commercial shrimp fishing. Assuming 100% (high), 95% (middle) and 90% (low) are the commercial shrimp fishing. Section 4: Proposed Fiscal Impact High Middle Low Cash Recurring Cash Recurring Cash Recurring m 0.4m $0.3m $0.3m 0.3m 0.3m m 0.4m $0.3m $0.3m 0.3m 0.3m m 0.4m $0.3m $0.3m 0.3m 0.3m m 0.4m $0.4m $0.4m 0.3m 0.3m m 0.4m $0.4m $0.4m 0.4m 0.4m List of affected Trust Funds: 100% STTF distribution Section 5: Consensus Estimate (Adopted: 04/09/2013 ) The conference adopted the middle estimate. GR Trust Local/Other Total Cash Recurring Cash Recurring Cash Recurring Cash Recurring (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.3) (0.4) (0.4) (0.4) (0.4) (0.4) (0.4) (0.4) (0.4) 370

22 A B C D E F G H I J HB 423 amendment commercial fishing Based on ES202 wage data naics = shrimp fishing # business # employee wages avg wage wages % FY ,776,562 $27,540 FY ,351,640 $30, % FY ,766,368 $28, % FY ,450,922 $32, % FY ,042,707 $32, % based on Florida Statistical Abstract 2011, commercial fishing naics=1141xx CY ,520,000 $28,204 based on CY sales tax data, taxable value of dyed diesel fuel # business taxable $ 6% offhwy fuel CY ,711,110 16,302,667 FY CY ,375,815 7,222,549 FY CY ,493,296 9,149,598 FY CY ,203,890 12,792,233 FY after eliminating other categories, left fishing and marinas CY ,626,635 2,197,598 HiGH based on naics=1141xx from CY 2011 sales tax data CY % of B % 17,015,523 1,020,931 MIDDLE The percentage of (shrimp fishing) is about 40% of 1411xx commercial fishing CY ,806, ,373 LOW FWC commercial fishing license information fishing license shrimp harvest FY , % FY ,271 Further, there were 843 commercial fishing licenses that reported shrimp harvest in 2012 use transportation REC diesel fuel growth rates REC Feb 2013 use pump price growth rate from REC Feb 2013 Transportion off hwy off hwy shrimp fishing High Middle Low growth % price grwth estimates growth growth FY ,197,598 1,020, , FY ,178,204 1,011, , % -3.30% % -0.88% FY ,239,194 1,040, , % 0.00% % 2.80% FY ,375,505 1,103, , % 3.50% % 6.09% FY ,483,605 1,153, , % 2.20% % 4.55% On Feb 1, 2013 impact conference adopted the average of middle and low estimates as the shrimp fishing shrimp fishing is about 40% of commercial fishing adopted low estimates 2/15/2013 assuming 50%, 65% and 80% exempt from sales tax 40% total High Middle Low adopted commercial 50% 35% 20% shrimp fishing fishing FY , , ,326 FY ,652 1,786,630 FY 14 cash 818, , ,549 FY ,345 1,770,863 FY , , ,173 FY ,179 1,820,447 FY , , ,089 FY ,507 1,931,267 FY , , ,253 FY ,660 2,019,151 FY , , ,830 Based on DOR TAA 99B5002, a large number of commercial fishing vessels are currently exempt from sales tax High Middle Low 100% 95% 90% FY , , ,593 FY14 cash 327, , ,794 FY , , ,755 FY , , ,680 FY , , ,628 FY , , ,

23 REVENUE ESTIMATING CONFERENCE Tax: Sales and Use Tax Issue: Spring Training Distribution Bill Number(s): HB5601 Proposed Amendment Entire Bill Partial Bill: Section 6 Sponsor(s): Finance and Tax Subcommittee Month/Year Impact Begins: July 1, 2016 Date of Analysis: April 8, 2013 Section 1: Narrative a. Current Law: Florida Statute s outlines the procedures whereby local governments become certified to receive state funding for the purpose of acquiring, constructing, reconstructing, or renovating a spring training facility. The applicant may use funds provided according to provisions under s (6)(b), which states that the Department of Revenue shall distribute up to $41,667 monthly to each certified applicant as defined in s , F.S. for a facility for a spring training franchise. However, not more than $416,670 may be distributed monthly in the aggregate to all certified applicants for facilities for spring training franchises. In order to become certified, the facility for a spring training franchise must be located in a county that levies a tourist development tax under s , F.S., which authorizes the levying of an additional 1 percent excise tax in order to pay the debt service on bonds issued to finance the acquisition, construction, reconstruction, or renovation of a retained spring training franchise facilities. Retained spring training franchise means a spring training franchise that had a location in this state on or before December 31, 1998, and that has continuously remained at that location for at least the 10 years preceding that date. b. Proposed Change: Section 6 of this bill creates s F.S. Retention of Major League Baseball spring training baseball franchises. The proposed language states that any agreement with a spring training facility may not be signed more than 4 years before the expiration of any existing agreement with a spring training franchise for the use of a facility. The proposed language also states that the state incentive funding to be distributed per certified applicant may not exceed $20 million. However, if a certified applicant s facility is used by more than one spring training franchise, the maximum amount may not exceed $50 million, and the Department of Revenue shall make distributions to the applicant pursuant to s (6) (d) 6. E. for not more than 37.5 years Section 2: Description of Data and Sources Lease expiration dates provided by the Florida Sports Foundation Section 3: Methodology (Include Assumptions and Attach Details) No new payments may be distributed until July 1, The estimate assumes that if a lease expires it will be renewed that year. The estimate assumes that, in addition to one expiring team lease being renewed, one new team will sign and receive payments for half of the FY. Section 4: Proposed Fiscal Impact High Middle Low Cash Recurring Cash Recurring Cash Recurring ($3.3m) ($3.3m) ($3.3m) ($1.0m) ($3.3m) ($3.0m) ($3.3m) List of affected Trust Funds: General Revenue Trust Fund 372