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  




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          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.




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          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 -  




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          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:





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          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

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