BILL ANALYSIS Bill No: SB 1260 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2009-2010 Regular Session Staff Analysis SB 1260 Author: Yee As Proposed to be Amended: April 13, 2010 Hearing Date: April 13, 2010 Consultant: Art Terzakis SUBJECT Alcoholic Beverages DESCRIPTION SB 1260 amends an existing provision of the Alcoholic Beverage Control (ABC) Act to enable guests to purchase alcohol (beer and wine) in sealed containers from hotel or motel gift shops. Specifically, this measure: 1. Authorizes hotels and motels, as defined, to sell or furnish beer and wine in sealed containers from "food sale areas" for consumption by guests and their invitees on the premises. 2. Defines "food sale area" as a food facility that routinely offers for sale, throughout the area's normal hours of operation each day to all of the lodging establishment's transient guests and their invitees, primarily items like prepackaged sandwiches, salads, snacks, candy, dairy products, water, soft drinks and other nonalcoholic beverages in bottles or cans, and similar food items, as well as, various sundries such as health and beauty aids, nonprescription drugs, film, and batteries. EXISTING LAW Existing law establishes the Department of Alcoholic Beverage Control and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control SB 1260 (Yee) continued Page 2 Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state and the collection of license fees or occupation taxes for this purpose. Existing law (Business and Professions Code Section 23355.2), enacted in 1985, permits full service hotels to offer alcoholic beverages for sale by means of "mini bars" in guest rooms. This provision of law was enacted in response to the introduction of mini bars in hotels in other states and internationally. Existing law (B&P Code Section 23396.1) establishes an on-sale general license for "restricted service lodging establishments" (e.g., Embassy Suites, Days Inn, Residence Inns, etc.) that permits hotels and motels to sell or furnish alcoholic beverages for consumption on the premises by means of: (1) controlled access alcoholic beverage cabinets (mini bars) located in guestrooms; or, (2) furnishing alcoholic beverages only to their transient guests and their invitees under circumstances where the cost of the alcoholic beverages is included in the price of the overnight occupancy accommodation. B&P Code Section 23396.1 provides that a hotel or motel licensed pursuant to this section shall not sell or furnish alcoholic beverages to the general public and shall not be entitled to a caterer's permit. Such an establishment is not permitted to operate a restaurant, it must have at least 10 guestrooms, and it may not derive more than 5% of its total gross annual revenues from sales of alcoholic beverages. Such licensees are additionally required to purchase all their alcoholic beverages from licensed wholesalers or winegrowers and must pay an application fee of $6,000 and an annual renewal fee, as specified. Existing law (Business and Professions Code Section 24045.11), permits the ABC to issue a special on-sale wine license to an establishment licensed to do business as a bed and breakfast inn. This provision of law, enacted in 1987 (AB 2308 - N. Waters, Chapter 615), was intended to permit bed and breakfast inns to provide small amounts of wine to registered guests. This law was not intended to place bed and breakfast inns in a competitive environment with other licensed businesses. SB 1260 (Yee) continued Page 3 B&P Code Section 24045.11 defines "bed and breakfast inn," as an establishment of 20 guestrooms or less, which provides overnight accommodations, serves food only to registered guests, serves only a breakfast or similar early morning meal, and in which the price of the food is included in the price of the room. In addition, the predominant relationship between occupant and owner or operator is that of innkeeper and guest. Existing law authorizes bed and breakfast inn licensees to serve wine purchased from a licensed winegrower or wholesaler only to registered guests. The law provides that wine shall not be given away to guests, but the price of the wine will be included in the price of the room. In addition, existing law prohibits guests from removing wine from the grounds of the establishment. The bed and breakfast inn license requires an original fee of $50 and an annual renewal fee of $6 for each guestroom in the establishment until December 31, 2004, and for each year thereafter the annual fee shall be calculated, as specified. Existing law (AB 1437 - Leslie, Chapter 53 of 2001) also authorizes the Department of ABC to issue a special on-sale "general" license to any person operating a bed and breakfast inn, as specified, to serve any alcoholic beverage, as defined, and to charge a $200 fee for that license and a renewal fee of $15 for each guestroom in the establishment, not to exceed $200. BACKGROUND Purpose of SB 1260: The sponsor of this measure, the California Hotel & Lodging Association (CH&LA), points out that going back several decades, the lodging industry was comprised primarily of "full service" hotels, such as Hiltons, Sheratons, Westins, and the like. At the same time, the motel segment of the industry was still young and there were very few, if any, bed and breakfast Inns. Additionally, it was very rare that a lodging establishment, other than a full service hotel, offered any sort of alcoholic beverage service, or food service, for that matter. Those full service hotels that desired to sell alcoholic beverages would typically obtain one of the two common types of licenses from the Department of ABC - SB 1260 (Yee) continued Page 4 the one for a restaurant (e.g., bona fide eating place) or the one for a bar (e.g., public premise). With the advent of a wide range of "limited service" lodging establishments (e.g., Fairfield Inns, Residence Inns, Days Inns, Embassy Suites, etc.), which rarely had either a bar or restaurant, a problem arose in terms of meeting guest expectations with respect to the furnishing of alcoholic beverages. As noted above (see "existing law"), the industry and the legislature, with the cooperation of the ABC, responded with enactment of new laws to allow limited service establishments to keep pace with the evolving trends in the lodging industry. For example, these "limited service" lodging establishments are currently allowed to provide alcoholic beverages from a controlled access cabinet (mini bar) in guest rooms and they are also authorized to provide alcoholic beverages to their guests during a manager's reception. The sponsor contends that this measure represents a carefully crafted expansion of existing law to enable "restricted service lodging establishments" to sell beer and wine from food sale areas for consumption by guests on the premises. According to the sponsor, this measure would: (1) limit the type of alcoholic beverage service that can be provided - that is, the license would permit the sale of beer and wine only from a food sale area; (2) limit the individuals who can purchase the beverages - that is, only guests and invitees of guests; and, (3) provide safeguards through the ABC licensing process. PRIOR/RELATED LEGISLATION AB 1750 (Hagman) 2009-10 Session. Identical to SB 696 (Yee) of 2007. (Pending in Assembly G.O. Committee) SB 696 (Yee) 2007-08 Session. Similar to SB 1260 (Yee) of 2010 - Would have enabled "restricted service lodging establishments" to expand the manner in which they may sell beer and wine to their guests. (Died on Assembly Appropriations Committee Suspense File) SUPPORT: As of April 9, 2010: SB 1260 (Yee) continued Page 5 California Hotel & Lodging Association (sponsor) Asian American Hotel Owners Association Marriott International, Inc. OPPOSE: None on file as of April 9, 2010. FISCAL COMMITTEE: Senate Appropriations Committee **********