You asked a number of questions about BESB's vending services operations. Specifically, you wanted to know (1) how CGS statutory provisions regarding food services and vending stands in public buildings and related regulations apply to municipalities and whether there are exceptions to the general right of first refusal that BESB has on vending operations, specifically machines; (2) how BESB spends the revenue that accrues from vending machines and whether any of it reverts to the General Fund; (3) whether BESB is more aggressively pursuing vending opportunities in municipalities and if there are initiatives on which the additional revenues will be spent; and (4) what the impact of such an expansion will be on local groups that have traditionally kept the machines' receipts.

SUMMARY

By law, BESB has the right of first refusal, without exception, on all vending services in any federal, state, and municipal building located in the state. These services include vending machines, dry stock, snack bars, and cafeterias. However, BESB has been opting out of certain vending opportunities, such as vending machines in school districts.

Despite this law, BESB operates less than one quarter of the vending machines in municipal buildings. (It operates most of these service in state buildings and federal buildings located in the state. )

Generally, the revenues from vending machine sales are deposited in a non-lapsing, special account and must be used to support BESB's Business Enterprise Program (BEP). This program helps blind individuals set up and run vending operations, such as cafeterias or newsstands. A new state law allows BESB to disburse some of the revenue to student and client activity funds as well.

BESB has been aggressively pursuing the machines in municipal buildings. With the additional revenues, it hopes to create entrepreneurial opportunities for more blind individuals. It is not clear how many local groups will be affected by these renewed efforts.

CSG SEC. 10-303, RELATED REGULATIONS, AND APPLICATION TO MUNICIPALITIES

The Law

The law (CGS § 10-303 (a)) requires the authority in charge of state- or municipally-owned, operated, or leased property to grant BESB a permit to run any on-site vending operations. This permit gives BESB a right, superior to all others, to operate vending facilities in public buildings. BESB regulations require the state or municipal authority in charge of the property to give written notice of his intent to establish a vending facility or install a vending machine on site.

Within 30 days after receiving notice, the executive director or his designee must check the location of the proposed facility for its potential value as a vending facility to be operated by a blind vendor and either:

1. request a permit or

2. notify the state or municipal authority in writing of his decision not to request a permit.

If the director requests a permit, the state or municipal authority must issue it, thereby authorizing BESB to establish and maintain a vending facility (including machines) on the property. If the executive director fails to respond to the notice within 30 days or indicates his decision not to request, the state or municipal authority can contract for other vending services (Connecticut Agency Regs. § 10-303-18).

BESB has interpreted the law to allow it to both license its own clients to operate vending services, as well as subcontract with food service companies who can place vending machines in public buildings.

The only exception to BESB's right of first refusal is a statutory provision allowing vendors who operated stands before the law's effective date (October 1, 1945) to continue in that capacity. The regulations governing the vending program, which BESB refers to as its Business Enterprise Program, say nothing about exceptions to this rule. Rather, according to BESB's Keith Maynard, the board attempts to accommodate local needs and in some instances has agreed not to take over vending operations (e. g. , Little League programs). Maynard also notes that BESB allows existing contractual relationships to expire before it will go into a building to run the vending services.

WHERE THE VENDING MACHINE REVENUES GO AND HOW THEY ARE SPENT

Legislative Changes and School Activity Funds

Until 2001, the law was silent on where state and local vending receipts were to be deposited. (The Randolph-Shepard Vending Stand Act (20 USC 107) specifies how money vending machines located in federal buildings must be spent. ) In practice, BESB was depositing them into the BEP account (see below). Section 35 of PA 01-9, JSS, authorized BESB to maintain a non-lapsing account for such revenues. The monies in the account must be used for fringe benefits, training and support for blind vending facility operators, and to provide entrepreneurial and independent living training and equipment to (1) blind adults and (2) children who are either blind or visually impaired. (BESB clients who run vending operations keep a portion of the machines' proceeds but they go first to BESB, which cuts them a check. )

In addition, the act authorized BESB to disburse state and local vending machine income to student or client activity funds. The law defines these as funds operated in state educational institutions or welfare or medical agencies set up for the benefit of their students or employees.

Before 1999, schools had individual contracts with vendors. Since then, BESB has signed an exclusive, 10-year contract with Coca Cola to operate all of its machines, which will increase the profits from sales to 35%. The schools are part of the BESB-Coke contract, but the proceeds remain with them instead of reverting to BESB.

According to Maynard, this will result in schools increasing their take from vending machines, rising from a low of 15% to a flat 35% of receipts. At this writing, BESB's contract includes the machines in 20 school districts. BESB hopes to get more of them to sign on with the promise of greater profits.

Business Enterprise Program

BESB' s Sales and Service - Business Enterprise Program Account (SID 361) receives a percentage of the money collected from the contracted vending machines in state and municipal buildings. The account is a non-lapsing restricted state account where all balances at the end of the fiscal year are carried forward into the next fiscal year.

BESB uses account funds: for start-up and renovation costs associated with the 31 statewide shops and cafés that BESB clients operate, to purchase new café equipment, for equipment repairs, and to pay the salaries and fringe benefits of the seven BESB staff that support this program. The Special Revenue Fund 1143 (Vending Operators Fringe Benefits) receipts are from vending machines located in federal buildings and support the health insurance benefits for all of the shops and café operators.

According to an annual report of its vending facility program that BESB submitted to the U. S. Department of Education, from October 1, 2000 to September 31, 2001, the agency incurred $ 600,013 in management services costs. This represents the payroll costs (salary and fringe benefits) for the BESB staff within this program. The same report shows $ 78,150 for operators' health insurance (operators of the shops and cafés). Of this total, $ 8,502 came from the Special Revenue Fund (1143) and the balance from the 361 account.

According to Table 1, based on the state fiscal year (July 1, 2000 - June 30, 2001), $ 2. 1 million went unspent in FY 00-01 and will continue to be available in FY 01-02.

BESB'S EXPANDED VENDING EFFORTS

BESB anticipates increasing the vending machines that will come under its control from 300 to 600 by 2003 through more aggressive outreach to municipalities, including school districts. (BESB is currently running the machines for most state buildings and federal buildings located in the state. Conversely, BESB operates less than one quarter of vending machines in municipal buildings, primarily in the state's largest cities. )

BESB's Maynard reports that since 1999, the BEP placed 10 new blind operators in businesses that employ almost 100 sighted workers. During FY 2002-03, BESB plans to open an additional 10 locations, which could employ up to an additional 100 people. BESB hopes that additional revenue will enable it to support these new businesses, by purchasing items such as kitchen equipment, and providing health and retirement benefits for both new and existing operators.

The agency is also in the process of hiring four new teachers, to be funded from the 361 account. Among other things, these teachers will work with blind and visually impaired students and train them for entrepreneurial opportunities once they leave school.

RC/CA/eh